Bitcoin investors are witnessing a meteoric rise in digital asset and have accumulated more than 170% of returns to date. Most recently, the critic of Bitcoin’s keen economist, Nouriel Roubini, recently softened his stance in an interview stating that Bitcoin could be “a partial store of value.” Ranks of several prominent finance and business names have endorsed Bitcoin – from BVI hedge fund manager Paul Tudor Jones, to venture capitalist Chamath Palihapitiya, and billionaire investor Stanley Druckenmiller.
This week, Larry Fink, CEO of BlackRock
Institutional coverage of Bitcoin continues to be strengthened by three main drivers:
- Historically Low Interest Rates – Federal Reserve Chairman Jerome Powell confirmed that we can expect near-zero interest rates for the foreseeable future, negatively impacting investors’ fixed income portfolios in bonds and treasures, and creating room for allocation to alternative investments.
- Inflation – With the Federal Reserve targeting an average inflation rate of 2%, investors sitting on cash or low-yield instruments are growing increasingly concerned about financial devaluation.
- Geopolitical instability – As political tensions rise between the US and China, and the Dollar’s reserve status becomes increasingly questioned, holding a portfolio dominated by USD poses an inherent risk to the long-term investor.
Recognizing these risk factors, public companies like MicroStrategy
As this bullish Bitcoin trend continues, another line of business has emerged – products of interest for cryptocurrencies.
Products like BlockFi, Nexo and Celsius provide interest accounts that earn 6% to 8% APY on their Bitcoin holdings. For investors who anticipate that Bitcoin will continue to rise in price, interest accounts are a great solution to maintain cash flow without selling any of the appreciative digital asset.
However, centralized platforms such as these have inherent risks that require the user to trust a new age of ‘crypto banks’, their teams, custody and processes.
However, a new wave of alternatives is coming from the devolved finance industry (DeFi). Devolved applications use smart contracts for interest payments to significantly increase transparency. From lending and lending protocols, to insurance, to asset management, smart, auditable contracts allow investors to view and track their funds on the chain while harvesting higher returns.
One example of this type of protocol, is the Kava Hard Protocol, which allows depositors to ‘harvest product’ from Bitcoin and other non-ethereum assets. Consumers ‘partake’ their crypto into a pool of assets, which the smart contract can then securely lend to a pool of lenders who collateralized their loans. This creates a decentralized and automated lending and lending platform, with no middlemen, custodians or fees. Similar to popular DeFi platforms MakerDao and Compound, DeFi’s main protocols of Ethereum assets, Kava prides itself on providing product gain opportunities to non-ethereum assets such as Bitcoin, XRP, and BNB. HARD gives investors a way to generate cash flow from their Bitcoin holdings, without first symbolizing their Bitcoin.
‘With the world increasingly turning to Bitcoin as a store of value and a hedge against economic uncertainty, KAVA and HARD money market services are well placed as companion products for this new wave of digital asset investors because they provide’ the rare opportunity for Bitcoin holders to do so keep their exposure while winning a double digit product safely, ” said Brian Kerr, Founder and CEO of Kava.
At the time of writing, Hard Protocol is leading the industry in Bitcoin returns, quoting APY of 41%. While the rate is not guaranteed, the trend is clear – the returns on decentralized platforms outperform those on central ones for Bitcoin.
Kava Labs is supported by Ripple, Arrington XRP Capital, Digital Capital Management, Hard Yaka, and Lemnis Capital, as well as industry-leading partners such as Binance and Framework Ventures.
As more dominant investors continue to participate in the DeFi space, the promise to participate in a better financial system is all too tempting. However, DeFi-based product protocols are still in nascent stages, despite their great promise to bring significant efficiencies to fixed-income products. There have already been several false starts in the space from the malicious link malfunctioning of the YAM Protocol to the unnamed founder of Sushi Swap withdrawing developer funds. Investors should proceed with caution in participating in these new technologies and continue to do their own research.