Financial Freedom And The Positive Role of Cryptocurrencies in Achieving It

  • April 23, 2024
  • Jennifer Moore
Financial Freedom And The Positive Role of Cryptocurrencies in Achieving It

Financial freedom also called financial independence has diverse meanings in different parts of the world. However, some common criteria differentiate financially free persons from financially not free persons. Those criteria include having sufficient income, savings, investments, and insurance to comfortably maintain the standard of living. The ultimate long-term goal of financially free people is to reduce reliance on their active income source for meeting emergency requirements. Traditional centralized finance often restricts financial freedom by design because it is largely responsible for persistent inflation that erodes the value of savings. Therefore, cryptocurrencies have a tremendous potential to break the shackles of financial bondage and pave the way towards financial freedom.

Positive Role of Cryptocurrencies in Achieving Financial Freedom

Cryptocurrencies have a huge potential to disrupt the existing financial system and liberate millions from the shackles of poverty and deprivation. The following are some of the positive ways in which cryptos can become a useful enabler of financial freedom.

Generates Surplus Wealth

People having surplus wealth are financially free and have a tendency to invest in higher returns by taking more risks. In such a scenario, the cryptocurrencies are alluring because they give investors higher returns. For example, early investors of cryptocurrencies such as Ethereum and Bitcoin have reaped enormous benefits. Similarly, last year Bitcoin was on a roller coaster ride by having consistently high value. 

The SEC has approved Bitcoin ETFs and this has boosted the credibility of the cryptocurrency worldwide. Despite being volatile, Bitcoin’s average annual return has been 155% over the last five years, while Ethereum’s appreciation was a staggering 460%. 

Promotes Diversification

From the perspective of investors, diversification reduces the impact of risks. There is no doubt that high risks can erode financial stability and deprive investors of their financial freedom. The traditional financial markets do not always correlate directly with markets aligned with cryptos. Therefore, allocating a certain amount of investments into cryptos automatically leads to better diversification. Experts believe that even a 1% allocation is favorable for investors. This is because even if the markets crash, the average investors may potentially double their returns on cryptos.

Guards Against Inflation

High inflation is one of the biggest disadvantages of centralized financial systems. By printing huge amounts of cash, governments cause inflation. In some countries, hyperinflation has caused widespread poverty. It rapidly erodes the value of savings of millions of users. Hence, experts term inflation as “a silent wealth eroder”. High inflation greatly reduces the purchasing power of fiat currencies within a short span. It obstructs the pathway to financial freedom. 

Cryptocurrencies can provide a hedge against inflation because these are not linked to any central bank or government. By investing in cryptos through SIP, one may get a predetermined sum in cryptos, regardless of price fluctuations. 

Liquidity and Accessibility

Crypto exchange platforms are famous for their high transactional speed which guarantees better liquidity and faster accessibility. The ease of faster entry and exit helps in securing financial freedom for both short-term and long-term holders. It also saves time which is precious for most business enterprises.

Fosters Growth and Encourages Innovation

The traditional financial systems by design exclude a large section of underprivileged sections of the population. As a result, they find it difficult to come out of their debt trap and the vicious cycle of poverty and deprivation continues. Cryptocurrencies in this regard offer a lot of hope as they are much younger than fiat currencies. Investments in cryptos can lead to fresh income streams such as yield farming, staking, and other allied crypto services. 

Also Read- Hong Kong Grants Approval For Bitcoin and Ether ETFs

To Sum Up

Financial freedom requires setting up financial goals, good analytical skills, and general awareness of financial markets. Cryptocurrencies are playing a positive role in revolutionizing the entire financial sector and making it easier for people to achieve financial freedom. Thoughtful investments in crypto can indeed offer a plethora of growth opportunities while keeping risks minimal. Cryptocurrencies are already gaining widespread acceptance and this phenomenon can indeed bring a dawn of unimaginable financial opportunities. 

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