Between HIVE and Bitcoin
It is a tough decision between investing in HIVE or Bitcoin every payday. Currently, I' have been stacking HBD. But, at current prices, I'm thinking about changing my focus. As an investor, I have faith in both HIVE and BTC. So, what should I take into account to decide where my meager savings should go?
The Case for Bitcoin
Bitcoin has the longest history of blockchain as a result of being the original blockchain. Thanks to the Lindy Effect, every year that Bitcoin survives ensures that it will continue to survive. Thus, in terms of security, Bitcoin is a safe bet for storing your wealth for the long term.
Sentiment is still strong that Bitcoin is at a bargain price and that the next bull run will take it to incredible heights. What keeps investors at bay is whether BTC has reached a bottom, or if it still has more room to fall? For my purpose, the upside is good even at today's prices. At the very least, it could reach the all time high at around $64K, which is still 3.75X the current price. Not bad.
Bitcoin also has the advantage that it can be used as collateral for loans. Thus, you could continue to stack BTC indefinitely. You could then borrow against it for emergencies. Your credit limit would grow along with your BTC bag. Say I have $5000 in BTC. If we return to the ATH, then I'd have $18,750 to borrow against. If we surpass the ATH, then the credit limit would increase as well.
The risk with BTC is that the investment is entirely dependent on the price of BTC and one's ability to buy more. As the price increases or decreases, one would buy more or less with the same dollar. Bitcoin does not grow in quantity. If you are earning interest on your BTC, then you are participating in a fractional reserve scheme. This is the sort of thing that has caused the crypto bear market.
The Case for HIVE
HIVE has not been around for as long as Bitcoin. However, the Lindy Effect has the same impact. Every year that HIVE survives raises the likelihood that it will be around for a longer time.
HIVE price is heavily dependent on Bitcoin price. If BTC goes up, HIVE generally goes up. The relationship is not a 1:1 ratio, unfortunately. We can only speak in generalities on this relationship as it is a loose correlation. But, what we can get from this is that if things go well for BTC, we can expect things to go somewhat well for HIVE.
Unfortunately, HIVE does not have enough market that it is used as collateral for loans. Therefore, it does not have the same utility as Bitcoin in terms of collateralization.
HIVE has an advantage over Bitcoin that is unique. This is that holding more HIVE gets you more HIVE. This growth occurs via inflation and activity rewards. HIVE has an encoded 3% inflation at present. The inflation rate diminishes over time. But, the point is that you will have more HIVE tomorrow than you have today.
You can also grow your HIVE holdings via curation and having your posts upvoted. Some Hivers are able to generate a 10% return via curation. Rewards from posting are widely variable based on the author. However, it's growth that does not come out of pocket. Unlike Bitcoin mining, which requires heavy investment in equipment and energy, mining HIVE only requires some spare time and an Internet connection.
In short, your Bitcoin holdings are entirely dependent on how much you can afford to invest. HIVE, on the other hand, can grow based on your investment in capital and time. Between paychecks, you can invest some time into curating and posting.
We Have Limits
Unfortunately, most of us investors have limits to how much capital we can invest. You can put it all towards one and not the other. Or, you can split your investment in two for smaller positions in both investments. We only have so much money to invest. So, it becomes necessary to thing which has the most upside potential.
Crossing The Streams
If you want to take the Ghostbusters route by crossing the streams, a risky endeavor, then you could collateralize BTC to invest in HIVE. In English, this means that you could buy up 100% of your savings in BTC. Then, you could borrow against your BTC to buy more HIVE. Then, you can split your future savings to pay down the debt while simultaneously buying more BTC. Once you have paid off the loan, you could borrow again to buy a lump of HIVE. Rinse. Repeat. You can eat your cake and eat a borrowed one too.
Of course, this is not without risk. There is always the risk that BTC will dump, leading to a margin call. Again, the whole borrowing and lending business of crypto is what has led us to this bear market. But, if you can manage the risk by not borrowing more than 50% of your collateral, you may fare well.
In time, your BTC position could grow to ridiculous amounts, leaving you with a crazy amount of credit. And, you could buy big chunks of HIVE with that credit, which could grow at roughly 10% a year not including capital gains.
A safer version of this play is to borrow against your BTC bags and use the loan to buy HBD to deposit in HBD Savings. You can use the HBD interest to pay off the loan. And, using your own paycheck, you could continue to buy more BTC. In this way you would mitigate the risk of a margin call by simultaneously reducing your debt while increasing your collateral with two sources of income.
At the moment, I am undecided. I like the idea of leveraging Bitcoin as I expect that it will eventually shoot up in price. However, borrowing against BTC requires leaving the BTC on an exchange, in this case Coinbase. The safe bet, which I'm currently doing is to stack HBD into Savings to earn 20% interest. Every paycheck buys me $3.33 in HBD interest per month. It's linear. Predictable.
I may try a modified version of the plan by purchasing $2000 of BTC and letting that ride. Any additional BTC would go to a cold wallet. In time, that $2000 purchase could end up being worth $7500 at 3.75X, more in time. That's plenty of credit for me. And, I could continue to grow my HBD savings.
Does any of this appeal to you? Are there any risks I have overlooked? Is there anything you would change?
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