Bitcoin Forum

My previous post "Use your money wisely. Invest or deposit ?" is a very hot topic which receives over 3000 views and more than 240 replies. I read all of your replies and summarize to one common advice: invest in Bitcoin rather than deposit in banks. To be frank, I totally agree and believe this is a great option (of course not put all eggs in one basket). The question is that most people say that 3% of deposit interest rate is nothing compared to inflation rate so deposit would be the last option if they had that amount of money. Well, in real life, I think 3% is quite good enough for deposit only if your other passive income combined is more than your expenses. Please let me explain. Your passive income is $1000 per month, and your salary is $1500/month. Passive income comes from the rental of the house your parents gave you or left you. Salary is from your regular and stable job. Your monthly expenses come to $1000 to $1500. The annual interest from the $100,000 is $3000, which means $250 per month. The rental income plus the interst sums to $1250/month and this money can cover your monthly expenses. In this situation, why don't you deposit that amount of money and feel no worries about your finances ? See, your passive income here can pretty much offset the inflation but that 3% is actually a compound interest rate which brings you more money every year. Plus, your salary of $1500/month, can also be saved in your bank account to earn more money. You know my point here ? I am trying to implement this deposit thing in real situation and find a possibility to benefit from.

You sound like someone who makes a lot of guesses about a hypothetical situation in which he is not. A passive income of the amount that speaks, what people usually do is spend it instead of depositing it in the bank. There are two exceptions to this:

1) People so rich that passive income far exceeds their level of consumption, so they reinvest it, but never in a shitty bank deposit, unless for a short period of time (to buy when they see an opportunity in RE or shares of a company).
2) People still in the accumulation phase, who in this case reinvest the liability but in the same way as 1). It doesn't make sense to put it in a deposit unless it's short term.

Your words are good on the one hand, but suppose, for example, if inflation continues at rates such as 10%, then within 5 years you will not have enough capital to cover these expenses, or rather, your capital will be consumed so that it will not be able to generate additional income for you.
So the issue is not the return on investment, but rather the nature of that investment, as its value decreases faster than the interest on it.
Your words will make sense if we are talking about gold ROI.

3% interest rate from deposit is nothing compared to the inflation in most developing nations. Some nations are experiencing up to 30% inflationary rate and the interest rate from bank deposit is just useless. The best option for me is to invest on a product that have a high rate of return. Investing on a product that its cost increases with the inflationary rate might be a good option. I might think of investing in Bitcoin and patiently wait for the bull run. Bitcoin has proved to be a very good investment over the years.

Generally speaking you should never hold more fiat than you need (eg. emergency funds for an emergency situation). After you deduct your expenses, however much fiat you are left with you should invest in something that can be considered a store of value while trying to diversify as much as you can.
In my opinion it doesn't matter how much your income is and how much interest rate your bank gives you, you still need to invest your fiat into something better.

Bitcoin, gold and real estate are the best choices in my experience. Things like stocks depend a lot on the economy and could crash hard while the risk of the same scenario is lower in those 3 markets I mentioned (it is not zero though).

Whatever percentage interest rate that we aim at in deposit or investment, we should invest in product that rises with inflation time and not policy ban. Product that are decentralised like bitcoin should be the best choice. If you have investment in rentage of house, you are also sure to meet up with the inflation rate. I think it is majorly about how we can take the advantage of inflation and not really to what percentage and guesses we make. We need some reality to survive in highly inflated economy. Don't invest in perishable things.

@OP you already stated that investment in Bitcoin will give a better yield then why bother advising people to deposit their money on banks?  Regular employee cannot avail the 3% interest per annum, they often stay in the bracket of 0.125% to 1% and besides 3% annual interest is somehow impossible in my country.
https://i.imgur.com/s0wFJgl.png

Take note only Php500,000 (approximately $9000) is insured on the deposited amount so I think it isn't worth the risk of putting huge amount of money on the bank.  If you have a good amount of money, I believe it is better to set up a small business or invest it somewhere else than putting it on the bank. And if you wanted to bank your money why not be your own bank by converting  your cash to Bitcoin and be in self custody.

Yeah even with the hiked FD rates are stupid investment these days. The highest I am seeing in my country is 7% per annum. But the issue is bitcoin can give us more than that in blink of an eye or it can take everything that we have. The factor that affects is: time. The more you wait on the bitcoin the more rewarding it gets. You know it’s like sugary fruit, the more you wait the more it rippen. For the banks, you get fixed % in return plus there are restrictions like premature withdrawals will get XYZ charge backs for breaking the FD and stuff like. It’s definitely not the thing with bitcoin.  ;)

The only reason that you think I am making a lot of guesses about a hypothetical situation is because you are not in that situation, but I am. What you said about the two exceptions proves that. You'll never understand.

 
You are right about 3% interest rate from deposit is nothing compared to some nations with insanely 30% infation rate but in my country, the inflation rate is only round 5% so it's still acceptable. There is no right answer since we are living in different places, which is normal.


Agree. Surviving in any situation is the King. Anything else comes secondary.


Investing in Bitcoin is definitely the best choince and I am NOT advising people to deposit but simply discussing a possibility to have reaonable returns with the minimal risks. Because depending on where i live,  most people with $1 million or half a million will deposit in banks and don't worry about money. Discovering more options is essentially helpful to make a better life. The purpose here is always to play safe, not make enormous money instantly. Chasing high yields is not everyone's choice.

Agreed.  The scenario OP envisioned has the hypothetical person earning quite a bit of passive income ("quite a bit" is relative, of course), and if that person was smart they wouldn't just stick that money in an interest-bearing deposit account no matter what the interest rate is.  It's nearly always a better choice to invest money in something that's going to outpace both inflation and whatever a bank can pay you in a savings account or a CD.

I don't trust banks, so I'm a bit biased but keeping some cash in one in order to use when a sweet investment opportunity arises isn't a bad move at all.  In fact, it's smart at a time like this when stocks are trading at extremely high price-to-earnings ratios.  I doubt Warren Buffett would be buying many stocks right now; he'd be waiting until prices came down and then he'd use the cash he had on the sidelines to buy them at a bargain.

"you deposit your money to a bank and then you pay them to keep the cash?"

I don't know where I've read that statement but it was sensible when they asked that. But I agree when they say, you better just invest your money somewhere than have an interest of 3% / year. There is a reason why people nowadays don't trust banks also, especially when you can't withdraw them in one transaction.

I don’t know how it is in all countries but here in North America most banks pay like 1% interest in a savings account. If you want more you need to move those funds to a specialized investment fund and the money might be locked until maturity. You can get 5% that way.

Sure you will keep at pace with inflation but keep in mind that inflation most likely peaked and might even deflate if we hit a recession. And then your 5% will become 0% when they cut rates again. Hence why you are better off buying assets like stocks which can go 50% instead of 5%.

Your idea is suitable for someone who is happy with making $3000 for their $100,000 investment and just staying in their own comfort zone but what is the reality we really want 50K returns from 100,000 which is quite unrealistic too but this shows how eager the people are into making more money so they won't go for the least option.

Instead of 3% why don't you consider staking which gives 8% that's big difference right?

It's a bitcoin related forum so what other advice you were expecting? Obviously people will tell you to invest in bitcoin.

I honestly do not think in a same way! Bitcoin is a super volatile asset class. If you are in your 20s and have some disposable fund in your hand, go ahead and take the risk. But with age, your risk appetite will decrease. Start balancing your investment among many other asset classes to make the most out of it. Bitcoin can make you a millionaire if you invest in right time but it can make you go bankrupt as well, if your timing is not correct. So proceed with caution.

From the security perspective, bank deposits are way more safer than bitcoin!

That's actually a good hypothetical situation that you've made but when it comes to the actual scene, everything varies.

You have to and face any situation that might come to you but having that discipline of depositing or saving will bring you too far, trust me. But you'll also come into many realization that depositing or having your money parked in a savings account, you won't be satisfied with the result of it even if it's a compounding interest. You know who's earning a lot and satisfied with compounding interest? The millionaires to billionares and the wealthier than them. But if even you're not on their shoe, you can extract and really benefit a lot from the discipline that it creates to you.

I think I understand what you're trying to say, but you'd have a hard time changing our mindset because we tend to be bitcoin users and invest in it.
 
Deposits are for those who tend to dislike the risk of price volatility, but everyone here is a person who accepts the risk of this volatility. You can expect people out there especially those who don't like bitcoin to believe and admit deposits are better and safer, but maybe not here.

I prefer gold over deposits, but bitcoin is a better choice.

I don't see depositing in a bank is a good choice to save money, it's a waste of opportunity in my opinion. Rather than depositing on bank where they get so much interest when someone borrow money from them using the money of their clients while their clients on gets a very small profits annually or whatever. Investing is much wiser, risky but it's worth the try rather than not going out of your comfort zone.

The fairest comment I have ever seen, people keep saying that it is better to invest in bitcoin instead of depositing, but no one here can say with 100% certainty that bitcoin will make a profit for them. Despite being 13 years old, bitcoin is still a super risky speculative asset, no one can predict what will happen to bitcoin in the future. All of our predictions are optimistic because we are investing in BTC, but that doesn't mean they will come true. I wonder, people who invest in bitcoin for $69k, how are they fighting inflation?

To be fair, depositing money or investing has its advantages and disadvantages, it just needs to be balanced most reasonably.

What you say is only partially correct. Risky investment is usually for people with little money because you need more money for living expenses, but while the rich, they will have huge savings in the bank and a few other investments. Investing all the money you have is not wise, it is only suitable for those who do not have too much money. Because there is no guarantee that the investment will definitely generate a return.

So for this to work, you need another house to rent, and 100k in the bank, which can get you 1000$ plus 250$ a month.
I find the numbers a bit weird but still, there is one question, if you believe in that compound interest in the bank, why don't you sell the house and put that money in the bank? If you're going to say that renting is safer, why not buy another one-bedroom flat with the money in the bank that for sure you could rent for more than 250$ a month?


The problem is that you have no guarantee that interest alone can offset inflation, right now with annual inflation of 10% you would need 3 years of interest and zero inflation for the next two years, so, it doesn't really work that easily! Besides, if keeping money in your bank would always generate enough income to offset inflation by now nobody would have a problem with money, no need to wait 1000 years like in Futurama!


And with 5% being bigger than 3%, you're not having a steady passive income, you're losing money as inflation bites on your capital!

You are both right and wrong at the same time. Rich people do have money at bank deposits because they can't just put all of that money into a company, and that "short period duration until they find a good stock to buy" becomes years because they keep making insane amount of money and they can't spend it at the same speed to buy some stocks.

Warren Buffet is a good example, they constantly have cash that they are trying to spend on buying up companies, and it's really hard because you can't just buy 2-3 billion dollar worth stocks from most companies, it would be pretty hard, only couple dozen companies are that big only. Hence, you are right usually, but there are exceptions as well.

Basic financial planning says 3% APY on $100,000 earns less than 7% inflation. Resulting in wealth declining 4% annually.

The basic premise for investment is to accumulate assets and wealth at a rate faster than inflation. In an year with 8% inflation, wealth would need to grow 8% to break even.

I think most who have a cool $100,000 in liquidity to earn interest in, would choose to invest it in other ways. 12 month IRA (individual retirement accounts) accounts can earn close to 5%. I think long term IRAs can earn closer to 10% APY. But there is a limit imposed where funds cannot be withdrawn for a number of years. Its been a long time since I've thought about IRAs but it may also be possible that their returns are tied to stock markets similar to 401ks. Which could indicate some long term dangers in eras where stocks crash.

For those who have $100,000 on hand, they might venture into real estate investments to earn higher than 10% APY. The way this would work is, buying cheap homes in good locations. Repainting, refurnishing, cleaning and reselling at a higher price. (House flipping) Or in some cases, if there were cheap real estate lots which were overgrown with vegetation. It may not be that difficult to clear the lot to increase the resell value.

There are youtubers with less than $20,000 who have bought properties and homes which they used for rental purposes to collect passive income.

But it should be mentioned that real estate markets are in a considerable amount of flux atm.

What you said is all your "guess" but what I assume is actually what I am doing and having now. The difference is that we live in different worlds and I am just offering or exploring another possibility. That's it.

A passive income of 1000 USD per month sounds nice, but how many of us actually have that? Among my friends the most of us are not getting a house from our parents we can rent out. My parents for example only live in an apartment and my dad is already quite sick that he needs daily care, which is already expensive. The healthcare system only pays so much and its likely that they will have to get a mortgage on their home later. I don't even want to think of inheritance taxes because real estate prices have been rising a lot, we might not be able to keep their apartment. So in my case the passive income is not really an option and the inflation is still horrible. For 2023 I expect we will have around 7-10% inflation, while my bank account still only pays 0.3% interest. Cash deposits are the worst form of investment in my opinion right now and I prefer to buy cryptos.

Someone who makes a guess has also reflected on past experience so that his views will certainly be very different even though they are still in a very logical category. Because basically if income is always greater than daily expenses, of course making a deposit for investment is something that can be done by anyone as long as the person doing it understands the risks and uncertainties in making a profit.

I think everyone now is still in the same world because there is no other world that can be inhabited by many humans. However, what makes the difference is the way of life and the way of doing work that all human beings are used to doing. Apart from that there is no difference whatsoever even though everyone's income also varies greatly in this world.

It would be better for me to invest in bitcoin than to keep my money in the bank because, with so many fees that would be applied to my savings, I would never get good returns. The amount can reduce because of these fees. Unfortunately, the bank will not tell you what the fees are. They just said that it was an administration fee and others. Well, a lot of people believe that.

I have never tried to deposit at a bank, but based on my friend's story, if the money we used to deposit at the bank is a small amount, the amount we will receive is also small. That's why I've been trying to allocate some money to invest in bitcoin since I got to know bitcoin. And by waiting about 2-4 years, the return I received from bitcoin already exceeded the interest offered by the bank.

But if you invest all your money, there is no guarantee that the investment will give you a return, the investment is not only profitable but also risky. So we need to diversify and deposit is also necessary for our life. Depositing is not only to create passive income, but also to help us solve unexpected work.
Inflation is like a bear market, it will peak and then drop and the economy will return to normal, inflation does not last forever. I don't know your country, but in my country this year inflation increased, but with it, the savings interest rate also increased, they are proportional to each other, perhaps the government policy is not the same. Savers are benefiting, while borrowers are struggling, and since then the gap between rich and poor has been widening.

You get a lot of basics wrong in reality. Buy bitcoin, sure, but realize that you are speculating much more than investing and there are subtle differences. You don't really have a clue whether bitcoin will go up again or continue going down, there are a lot smarter people than us who lost (and made on the way up) lots more money than we could ever imagine - but they have the sense to know that what they were doing was essentially gambling. You open your message saying to "invest" in bitcoin, which brings absolutely zero passive return and then trail off into a story about banking deposits and rental income, there is no consistent thought going into your strategy at all.

I agree that investing in bitcoin or any other investment is better than deposit in terms of profit, but in terms of safety, I don't think you are right. Once it is an investment, there is always a risk, not just a profit, if the investment is only profitable, we are already billionaires. What if bitcoin never rises again? Have you thought about that? Or do you have any proof that bitcoin is definitely going to grow? Everything is risky and what I mean here, it would be wise to know our asset diversifications, invest and deposit.

Deposits are made to have funds for living or the things we will do and emergency purposes. But when it comes in investing it will not be a good option to grow our money, there are several options we can choose but none of them can really guarantee a higher return unless we tried having it, some properties can grow in value in time but depending on its location, golds will have a higher value the bigger it is and in crypto depends on where we will invest in and in what time we will actually buys it. Inflation will keep rising so we must not depend alone in deposits but must have investments too.

In 2016, my father tried to deposit 10 million rupiahs or about $640 today, in a government bank for one year. And after a year had passed, my father's return was only around 70 thousand rupiahs or about $ 5 that had not been deducted from the fees from the bank.

From there, I thought that it is useless if we want to try to deposit our money in the bank because the interest or return is very small. If I, at that time, advised my father to invest in bitcoin with his 10 million and I held the bitcoin until 2019, my father would be very surprised because the value of his money had increased much and he had never imagined it.

The OP has valid ideology when it comes to his finances. The only problem on this analysis was he assumed that his expenses is fixed to value he gives which don’t give any room for additional expenses for improvement of his life like better apartment, food and other things to improved his life. Not to mention the future expenses for having a family and raising a child. The computation of OP only assumes a regular life that revolves on same routine until the end which makes him contented on a 3% bank interest rate over more chance of earnings for the money being stagnant on bank deposits.

Also, fiat is expecting to depreciate its value in the long, so why hold most of it? Even if banks will offer high interest rates, for me that would still be enough and will never be reasonable. Fiat will still create a big difference if you decide to invest it in potential investments like bitcoin, real estate and gold. The more you diversify your investments, the bigger the profits you are expecting to gain. Saving in banks is good, but it will be more helpful and profitable investing them in investments with high ROI.

Saving in banks is just like keeping your money safe and secure but not earning interest.
The interest offered by banks are so small, it is deemed negligible even after a year of holding your money.
So yes, if you can diversify it with other investments like real estate, that would be better.
Because with real estate, we know most of them are increasing its value thru time.
Gold is a tangible asset also that is good to invest as it has been in this market since time immemorial.

Total dependence on Passive income is not a good idea but passive income can be a good source of retirement income because it can provide a steady stream of income without the need to continue working. However, it's important to diversify your sources of income and not rely solely on passive income, as it may not always be reliable or sufficient to meet your living expenses. It's a good idea to have a mix of passive and active income sources in retirement.

In general, the return on bank deposits is lower than the rate of inflation, that's why I think it is a better idea to invest in Bitcoin on regular basis in bear market and wait for return of bull run to harvest huge returns which can be deposited in bank or use it for investing in real estate to increase passive income.

It is true that there will be risks behind the investment, say investing in bitcoin. But as long as we can figure out how to reduce the risk, we will not think too much about the risk but think about how we can increase our investment. Only faith and belief in bitcoin can strengthen us to hold on to bitcoin until its price increases and you have seen that bitcoin investors have been holding it for a long time and waiting for the right moment to sell their bitcoins. But for other investments, I don't know. And that's why before people invest in any type of, they have to learn everything so they will be able to manage the investment.

A bank deposit has long lost its relevance, because the profit that you can get from a deposit, firstly, will be less than the inflation rate, which means that you will simply lose the purchasing power of your money, and secondly, it is also a risk of losing your money, because the bank is not the most reliable way to store your funds and sometimes it happens that you can not take them in full, at any time you need them.

Try to find more profitable sources of investment, bank deposits are a thing of the past. People who have been able to create capital will not deal with deposits, they already have an understanding of how to work with money for a good profit.

Investing in bitcoin is considered the riskiest investment, and there is no way for you to reduce your risk by just investing in bitcoin. Early bitcoin investors, they get huge profits, but there is no guarantee that our investment from now on will still be profitable without risk. As I said: there is no proof that bitcoin is 100% sure bitcoin will increase in the future, so to reduce the risk, you need to diversify other assets, bitcoin does not help you reduce risk.

If you are an investor, you need to consider the risks rather than ignore them, especially with a new and volatile asset like bitcoin.

And that is only the offcial inflation. Real life inflation is used to be superior to the official rates announced by the government. It's common to compare prices of a same product in the supermarket in a year time period and conclude it has been raised in 10%, 15%, 20% or even more... They will say there are another factors influencing this besides inflation, like rainy or dry seasons, but the fact is that prices never go back to original prices. So I guess besides inflation there is also some greediness from retailers and producers, especially when there is a government transition.

And if you invest in bitcoin from December 2021 and hold till now, your assets will decrease by 80% in value, i.e. just add another 20%, your assets will be zero. Investing or depositing has its pros and cons, don't just look at the bad side of something that evaluates. Investing is also risky and will sometimes make your money disappear forever if you invest in the wrong place.

Your thinking is actually quite good if it is carried out in a country that has a stable economic level and its currency does not experience inflation of more than 1%. but in which country is it? although there are definitely very rare. because in fact the inflation rate since 2020-2022 has increased rapidly in many countries. even in developing countries there are experiencing hyper inflation.

Earning 3% annual interest on depositing money in the Bank becomes unprofitable if our country's currency has depreciated. and inflation in the price of goods has exceeded 10% in a year. Even now, 10% inflation can occur within 1 month in several countries. and inflation in a year can exceed that figure.

for example in my country fuel prices during 2022 have increased by almost 40%. and the prices of daily foods such as rice and fruits have also increased by more than 25% in a year.
so that in my situation in my country which is affected by inflation. then choosing to deposit money into the bank is a bad choice. I prefer to invest in properties such as strategic land to be used as housing in a few years. because the price of a piece of land continues to rise even in times of inflation. in a year in my country normally a piece of land continues to experience a price increase of around 5-20% per year. and it depends on the location of the land. because the price of land that is on vehicle access routes and close to big cities can even increase by 20-50% per year. because it has good potential. especially if we build a housing on it. then the selling price can increase by hundreds of percent. but for land that is inland or far from big cities. then the increase is very small, only around 5-15% per year. but still better than depositing our money in the bank.

and setting aside a few percent of our money this year to invest in bitcoin isn't too bad either. because in the next year (2024) bitcoin is expected to experience a very good increase (bitcoin halving).

That is why the investment in bitcoin shouldn't be made thinking on short term. Investors must keep in mind it may be necessary to hold for few years until seeing some financial progress on their holdings. Remember there were also people who bought bitcoin during the ATH of 2017 (19,000$), saw their investments melting to 3000$ in 2018, but the profit finally came in 2020 for those who were patient.

In this case I think it's more about waiting the right time than investing in the wrong place.

In addition to investing at the right time, we also need to know that in the past bitcoin has been profitable for many people but that does not mean that in the future bitcoin will also be profitable for us. What we are doing is just hoping bitcoin will rise again, there is no 100% guarantee. So don't just invest in bitcoin and see it as a lifesaver, we need to diversify, invest and deposit. Why choose only 1.

I live in a world where you can't bend math, that's it!
If you have 100k sitting in a bank and you get 5% interest rate in 10 years you're going to have 162k
If a thing costs 100k and you have an inflation of 7% in 10 years that will cost 196k.
So, in order to buy now the thing you could afford with your money 10 years ago you will have to cough up another 34k.
And in no world does this end otherwise!

Don't forget about bank charge, withdrawal limit, freeze funds, and you can't withdraw all of your money, which will make you can't get all of your $162K.

Bank interest can't beat inflation because when the bank need to pay the interest amount, they need to print new money which will increase the inflation rate. Bank is smart enough since it make people willing to put their money on bank because they feel there's no reason to hold it alone or put in piggy bank since they wouldn't earn any interest. That's why middle and poor people always lose their money and they can't change their life.