Bitcoin and Crypto Will Replace Bank Savings Accounts
Plus, Bitcoin Surges Past $50,000!
Times have changed.
The bank savings account used to be America’s preferred method of accumulating money. Put some of your paycheck into your savings account each payday, earn 3% interest (or more) and watch it grow. All insured by the Federal Deposit Insurance Corporation. Sweet deal.
Oh, but that was yesteryear. The banking model has certainly changed. Not only have those cute little blue passbooks gone the way of the VCR tapes, but the 3% interest yield has vanished as well. Check out the average yield on today’s savings accounts:
“According to the FDIC, the national average interest rate on savings accounts currently stands at 0.04% APY. This applies to both average and jumbo deposits (balances over $100,000).” - Lauren Perez, CEPF.
Just .04% interest on a $100,000 deposit. The banking system that we knew has been completely transformed in the last twenty or so years.
Bitcoin fixes this. In every way.
The Interest Yield
While the old savings accounts were paying 3%, certificates of deposit and money market accounts were paying much higher. Ten to twelve percent yields were not uncommon in the 1980’s. As mentioned above, there is little to no interest to be earned on a bank savings account, money market account, or CD. The average 5-year certificate of deposit is only yielding .31%. Imagine, not even close to 1%, and locking up your money for five years.
Not so with crypto earnings accounts. (See Issue No. 4, May 28, 2021.)
Most crypto exchanges give the account holder the option to earn interest on their Bitcoin and other crypto balances. Rates on Bitcoin range from 1.65% per year up to as high as 8.6%. With some other altcoins, rates can be even higher. Some exchanges, partnering with finance companies, even qualify for the FDIC insurance on balances up to $250,000. Consult each exchange for details.
The Technology
Let’s see: Bitcoin and crypto are essentially banking available on your phone, 24 hours a day, electronic transactions, no travel or human contact required,
versus:
Drive to the bank (between 9AM and 4PM weekdays), remember your passbook, wait in line, hand your deposits to the teller, fill out a deposit slip, then get a statement in the mail once a month.
The choice is obvious.
The Price Appreciation
Bitcoin is one of the few asset classes that offers interest earnings as well as the potential for price appreciation. For long-term savers who have no immediate needs for their principal, this may be the perfect fit. Bitcoin’s price has risen by an average of 200% per year over the last 12 years, albeit not without plenty of volatility.
If savers have no immediate needs for their money, and can withstand some volatility, they should be rewarded with handsome interest yields as well as price appreciation over time.
And, if savers don’t want to risk any principal, then check out stablecoins, below.
High Yields with Stablecoins
So-called stablecoins, digital coins pegged to the US Dollar, do not fluctuate in price but rather hold steady at a $1.00 value. Thus, there is no potential of price appreciation, but there are big interest yields available. Gemini exchange, for example, offers 7.4% interest on their stablecoin, the Gemini Dollar. Additionally, Gemini charges no fees or commissions to purchase stablecoins. It should be noted that, much like money market accounts, no one has ever lost a dollar of principal in an interest-earning stablecoin account. As the public grows more comfortable with these assets, it would seem that lots of savings would flow to them for the safety and the interest yield. (See Issue No. 4, May 28, 2021.)
The Future:
Bitcoin certainly has the potential to replace gold as the store of value of choice, due to many of the same reasons noted above. It’s widely believed that Bitcoin is better at being gold than gold is, sometimes called Gold 2.0. Well, I conclude, also, that Bitcoin is better at being a savings account than any bank savings account is. Just look at all the reasons above.
Bitcoin is the savings account, and the store of value, of the future.
Bitcoin Price Regains the $50,000 Mark!
The price of Bitcoin surged on Monday to around $50,300. The rise marked a 68% increase since the dip in late July, when prices dipped below $30,000. Bitcoin is still a ways off of its all-time high of around $64,000. However, on-chain analysis suggests that short-term traders (“weak hands”) have been flushed out and long-term holders (“hodlers”) are sitting tight, creating a supply squeeze in the Bitcoin markets. The Hodlers have been dubbed the “Rick Astley’s” of Bitcoin. (“Never Gonna Give You Up”)
Twitter Account of the Week:
Dan Held explains Bitcoin in a simple, straightforward manner. His tweets are brief, to the point and effective. He is the Director of Growth at Kraken crypto exchange, and can be heard on all of the top Bitcoin podcasts, like What Bitcoin Did with Peter McCormack. He publishes a weekly newsletter on Substack and also appeared at Bitcoin 2021 Miami.
Link: The Held Report
Issue No. 18, August 27, 2021
Rick Mulvey is a CPA, forensic accountant and crypto consultant. He writes about all things Bitcoin, and yells at the Yankees and Giants. He also runs marathons and makes wine, neither professionally.
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