Tuesday, May 17, 2022

Increasing Dividend Yield Part VI: Crypto Currency Earning

This is the sixth installment in a multi-part series that looks at various options used by income investors to boost their yield while waiting for dividend growth to lift their portfolio's overall yield-on-cost. Last week we looked at Master Limited Partnerships (MLPs). This week we are looking at Crypto Currency Earning.

With the volatility of Crypto Currency, you might wonder why I would even mention this. However, there are coins and tokens that are denominated in U.S. Dollars. These are called stable coins because they strive to keep a 1 to 1 relationship with the U.S. Dollar (and other fiat currencies around the globe.) This eliminates the significant price volatility Crypto Currency is known for.

You might be thinking, 'Ok, so what is the the advantage of having a dollar wrapped in crypto currency?' The answer would be - yield. While most Money Market Accounts are now paying less than 1%, crypto lending can earn you significantly more than that. For example, currently on Voyager I am earning 9% and on Gemini I am earning 6.9% on U.S. Dollar Stable Coins.

Needless to say, there is risk involved with these investments. Consider these:
  1. They are not insured by the FDIC. So if there is a loss, it is all yours.
  2. The loans could go bad, and you could lose a portion (or all) of your investment.
  3. The exchange where you bought the crypto could cease to exist.
  4. S.E.C. might shut it down. They have already made some exchanges stop their lending program.
To mitigate some of these risks, most exchanges require the borrower to put up crypto currency equal to the amount borrowed as collateral. But when prices go down, the loan amount may not be fully covered. 

I have allocated a small portion of my cash position to lending Crypto Currency Stable Coins. Given the risks, I don't anticipate it will grow too large. I am currently at 1.4% of my total portfolio, with a long-term target of 5%. 

If you decide to try Crypto Currency Earning, use my Voyager affiliate link (or referral code JAM033032) to signup. Once you download the app and trade $100 we both will get $25 of free Bitcoin. Or, if you prefer Gemini, use my Gemini affiliate link and we'll each get $10 of Bitcoin.

Full Disclosure: Long GUSD, USDC,

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