Make Sure It's Compounding

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12 Apr 2024

Digital Land Of Opportunity
The Crypto space offers unparalleled opportunities when it comes to income generation, as well as wealth creation. It’s an industry rife with opportunity. However, for many, it’s merely a speculative market. The truth is that Crypto is unlike any other financial market. Crypto offers a plethora of income-generative ideas, including staking, yield farming, airdrop hunting, P2E, and WEB3-incentivized blockchain-based social media platforms, to name but a few.
The speculative aspect of Crypto is truly amazing, and I will never downplay the magnificence of altcoin returns in a bull market. However, we should simultaneously embrace the many other lucrative avenues in the Crypto space. When you examine many of these models, a common theme becomes apparent… and that’s compounding. This is a key aspect of wealth generation and goes hand in hand with passive income.
In many cases, compounding and passive income are synonymous. Take staking for example, you get to earn passive income through the process of staking your coins on a Proof-of-Stake blockchain. However, at the same time, you can compound your holdings over time. Studying the behavioral practices of the average millionaire will reveal that most millionaires have multiple streams of income.
These are usually passive income streams, and as such can produce the desired outcome… compounding. Whatever investment class you happen to choose, the aspect of compounding will always be found in a portfolio that outperforms the benchmark. Finding ways to ensure that whatever assets you are holding can produce additional yield is imperative. Investors like Buffet have often mentioned that Bitcoin has zero cash-generative capabilities.
This is not entirely true. Although Bitcoin is a lot more restrictive than altcoins regarding income-generating capabilities, it is by no means void of opportunity. Multiple DeFi opportunities for BTC involve alternative blockchains such as Polkadot. As usual, creativity and exploration are the distinguishing factors that will make all the difference in what an investor can accomplish.
Assess & Analyze Risk
Of course, investors should never put all of their assets at risk. However, seeking out opportunities that vary, regarding risk and impermanent loss can go a long way to increasing the value of any investment portfolio. Trading with a portion of my long-term holdings is one way I go about compounding my portfolio. If you are a regular reader you will be aware of my current goal, regarding trading, accumulation, and the eventual goal of whale status regarding a particular Crypto asset.
This particular goal is a lot more achievable when a project is still in the micro-cap sector. However, the project I have my eyes on is close to a half-a-billion market cap, making it a lot more expensive to gain ownership of 0.005% of the circulating supply. Gaining this type of exposure in a micro-cap with a minuscule market cap is relatively achievable for most investors. However, will it ever reach a meaningful market cap, and as a result, have any significance?
And so, finding an opportunity that is still within reach, but simultaneously offers the potential of meaningful whale status is key. For example, it would have been reasonably affordable if you gained 0.005% of Ethereum’s circulating supply when it launched its ICO. However, try and get your hands on 0.005% of ETH’s current circulating supply. It’s almost an impossibility for most investors.
Currently, 0.005% of ETH’s supply is 6003 ETH, which at the current ETH price is approximately $21 million. Yes, inflation is not factored into this extrapolation, but you get the idea. Essentially, investors need to find ways to compound their holdings, whether they stake a portion, or utilize one of the many other creative opportunities within the space. It’s a key aspect of portfolio growth and expansion.

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Final Thoughts
Passive income and compounding have often been at the heart of my writings. I find these two very similar dynamics enormously powerful and am always mindful of how I can better implement and appropriate them to my existing strategies, as well as create entirely new strategies, given I find a creative way to bring them about. Keep stacking, keep compounding, and I will catch you in the next one!

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Disclaimer
First of all, I am not a financial advisor. All information provided on this website is strictly my own opinion and not financial advice. I do make use of affiliate links. Purchasing or interacting with any third-party company could result in me receiving a commission. In some instances, utilizing an affiliate link can also result in a bonus or discount.
This article was first published on Sapphire Crypto.