How To Invest In Stocks, ETFs & Precious Metals Using Crypto: An Introduction To Decentralized Assets


An Overview

Investing in stocks just means buying tiny shares of ownership in a public company. Those small shares are known as the company’s stock — purchased in good faith and hope that the company of interest would appreciate in value over time, alongside an increase in the value of its stocks, which the investor can then sell off for profits. Some traders keep stocks for dividends — the equivalent of cryptocurrency HODLers. Whichever strategy you prefer, either actively trading (buying low and selling high) or keeping stocks for long-term, the stock market presents an enticing opportunity to generate passive income.

 

The Problem

It is not uncommon to find early investors overwhelmed by the art of trading stocks.

Have you ever been curious and eager to venture into the stock market, yet fazed by the following factors?

· Unsure where to begin with?

· Unsure when to invest in, or when to time the market?

· Unsure which stocks to invest in?

· Overwhelmed by trading terminologies like equity, ask/ offer, bid, spread, yield, PNL, PER, PBR and so forth?

· Daunted by high brokerage fees?

According to investopedia, the average trading fee per transaction ranges from $10 (for discount brokers) to $150 (for a full-service broker) — which can translate into quite a heft amount, especially if your capital isn’t large to begin with.

Fret not, you are not alone! These were my concerns when I started venturing into the stock market years ago. While I claim to be no expert in this field, I have had my fair share of ups and downs in stock market trading after all these years. Being invested in digital assets, my curiosity was piqued when I encountered the concept of ‘decentralized assets’, which led me into a foray of no return into this exciting realm of possibilities, which indeed promises a revolutionary form of crypto investment!

 

An Introduction To Decentralized Assets

Decentralized assets are cryptocurrencies that can be created by anyone on the defichain blockchain. Essentially, they are digital assets backed by cryptocurrencies like DFi, bitcoin or stablecoins like USDT or USDC, that reflect the price of a stock of interest (oracle price).

 

Take the example of TESLA — The actual ticker symbol for a Tesla share would be TSLA. However, due to the way in which dTokens are minted in the DeFiChain, TSLA becomes dTSLA. It is important to state that the holding of a dTSLA token does not provide the user with ownership of TSLA; it is simply a digital token that is likely to follow the price of TSLA; however its price is also influenced by supply and demand on the decentralized exchange (DEX). As such, a dToken’s price may move freely and independently of the oracle price, depending on supply and demand of a given dToken on the DeFiChain DEX; but its movements will ultimately somewhat reflect the oracle price of the original stock of interest.

 

Difference From Conventional Stocks

A traditional stock is a share in the company, issued by the company itself and subject to a number of regulations, and confer the shareholder certain rights eg voting, and also benefits eg dividend payments.

Decentralized assets (dTokens) on the other hand exist on the defichain blockchain, and are not issued by companies. The decentralized asset is a ‘digital’ reflection of its oracle stock, whose price may be influenced by the oracle price in addition to other factors eg supply and demand. As such, these dTokens are minted by users, and any decentralized asset’s inherent value mostly depends on the value that the collective attributes to it (through trading on the DEX).

 

List of Available Decentralized Assets

Invest in popular tech stocks like Google, Apple, Tesla; or ETFs like the Invesco QQQ Trust Series 1, SPDR S&P 500 ETF Trust; or even precious metals like gold and silver! The list goes on and on, and will be expanded further in line with future developments of the DeFiChain.

 

The Possibilities

Decentralized assets once purchased can either be held for price exposure, traded (buy low, sell high!), or for participation into liquidity mining pools by pairing it with dUSD (which is pegged to the value of the USD on the defichain) for impressive returns of up to 200% APR (depending on the price of DFI — the native token of the defichain). Rewards from liquidity mining start pouring in about every 12 hours mainly in the form of DFI, but also small amounts of dToken you put in (e.g. dTSLA and DUSD). These rewards can then be used to compound interests by participating in staking or liquidity mining; or withdrawn.

 

How to Invest in Decentralized Assets?

  1. Via Cake DeFi — a one-stop financial platform offering the finest of staking, liquidity mining and lending services at APRs of up to 200% ! Watch the video below for a brief tutorial on how to invest with Cake DeFi. 

2. Via the native DeFiChain wallet.

 

An Honest Evaluation

Image taken from the DeFiChain Site

The Pros

#1 Double-dipping in crypto and stock market!

Decentralized assets offer the best of both worlds of cryptocurrency and the conventional stock market, by combining the high yields of liquidity mining (of up to 200% APR!) with the familiarity of investing in a company listed in the stock market. What could be better than profiting from the rising price of a decentralised asset and also receiving liquidity mining rewards that are distributed directly from the blockchain?

#2 Easy access

Anyone with a laptop or mobile device can easily access the defichain network via Cake DeFi or the defichain wallet and start investing in the decentralized assets, minus the hassle of having to register for a brokerage service.

#3 Minimal transaction fees

Gone are the days of expensive brokerage trading fees; the only fees incurred whilst purchasing a decentralized asset on Cake DeFi is a small 0.5% conversion fee to swap your DFI into the said digital asset on the decentralized exchange.

#4 Ability to buy in small amounts

It is possible to buy a small amount of dTokens — suitable for young investors who’d like to dip their feet in this exciting pool of investment!

#5 Easily transferable

All dTokens are freely denumerable and can be transferred to other people worldwide in no time at all, without having to rely on middlemen.

 

The Cons

#1 Inherent project risk

The project risk itself should never be underestimated — while measures are undertaken to ensure the growth and sustainability of the defichain, only invest funds that you can afford to lose! However rest assured that the defichain is a thriving community of financial experts and crypto enthusiasts who work tirelessly towards the goal of a stable decentralized finance; hence your funds are most probably SAFU.

#2 DFI price

As liquidity mining rewards are mainly paid out in DFI, earnings are affected by the price of DFI, a cryptocurrency. While the price of DFI has been booming, even outperforming bitcoin most of the time, past performance is not an indicator of future performance.

#3 Lack of dividend/ ownership of company

Owning a decentralized asset doesn’t confer the benefits of owning a conventional stock eg dividend payouts or ownership in a company which subsequently entail privileges eg voting etc.

 

Final Thoughts

Through decentralized assets, it is now possible for everyone to invest in the dToken with very small amounts. In addition, it is possible to profit through liquidity mining, allowing you to put your decentralised asset tokens into a liquidity pool and receive mining rewards for it.

In addition to riding on the price movements of the said stock, investors can easily and effortlessly purchase decentralized assets using a mobile device, with minimal fees, at higher yields compared to a traditional stock market investment.

Cake DeFi is a trustable and reliable one-stop platform to generate passive cashflow in many ways, of which the decentralized assets are a recent exciting addition! Sign up today and start enjoying passive income! As an icing to the cake, receive an upsized $40 bonus when you make your first deposit of $50 or more!

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Some materials used for this article were taken from the official Cake DeFi website and blog. 

This article was originally published by me on medium and read.cash

As always this is not financial advice! But simply investment platforms I have invested in and have found worthy of sharing with. Do your own research before investing and never deposit money you cannot afford to lose. Feel free to ask me any questions below.

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Cryptoindulgence
Cryptoindulgence

I'm an avid investor in stocks and cryptocurrency, keen to share my humble knowledge with the community.


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