If you reach financial independence in Australia you’re going to have some some weird and unexpected encounters with your fellow Aussies. A lot of it comes down to our culture, education and the value systems we grew up with. Here’s what to expect and how to navigate the oddities.
Why financial independence in Australia is totally weird
I’ve always been a black sheep of sorts. A contrarian thinker and do-er. So a little weirdness goes with my mojo. But if you’re an Australian working your way to financial independence, you many not be ready for what’s ahead.
Here’s a light-hearted journey through some of the oddness we’ve experienced since quitting well paying jobs to do more of what we want in life. 6 reasons FI in Australia is pretty damn weird:
1. You’re almost un-Australian
“So what do you do for a living?”
Work is a gigantic part of our identity and sense of self in Australia.
If you meet any Aussie in a social context expect to be asked what you do for a living. Usually, within the first 3 minutes.
If you’re financially independent, this can be a conversation killer.
Seriously, what do you say?
Expect raised eyebrows if you’re under 60 year old.
The truth is I’m not retired – I just do a different type of work. And besides, I’m not old enough yet to be retired.
“I’m financially independent…”
Cue… ‘Well, what exactly is that Ms hoity-toity high and mighty?‘
Get ready for glazed eyes and distant looks if you open your mouth to explain…
2. Ohh, you mean you’re a bludger…
It’s weird, but if you don’t have a job in Australia people assume that you’re poor or on the dole. A bludger in the local lingo. Unconscious bias or not, you might find that people look at you and treat you differently because of that.
Expect the judgy-mcjudge faces to come out.
IRL financial independence is the opposite of this. It’s you taking the ultimate responsibility for your own financial wellbeing, so the government doesn’t have to look after you. Financial independence flips on its head the widespread Australian cultural myth that it’s the government’s job to rescue us, many times from our own decisions and choices.
Forget trying to explain this around the backyard barbecue tho. Just ignore the furtive glances and dig into your free lamb chops. Yum.
3. You’re definitely less relatable
What proportion of the Australian population is financially independent? I’d love to know the answer. I don’t, sorry.
What I do know is that I’ve never met in person anyone else in my age bracket or social circles who is. I’m not saying they don’t exist. Just that they’re rare.
The reality is your ‘tribe’ becomes smaller when you make the transition to financial independence in Australia. You may just find that people don’t relate to you as easily because they don’t understand your lifestyle or your choices. Barbecue conversations centred on work gossip and industry chit chat become foreign territory.
Financial independence is a different way of thinking than the mainstream. It can be a chasm too far to cross around the barbie or other social situations.
4. General social life weirdness
Expect your social life to take some weird twists and turns once you exit the workforce.
Forming social connections outside of work takes work. There are no protocols in place, like after work drinks or birthday morning teas, to meet people, network and become friends. There’s no team bonding, ‘us against the world’ kind of culture. There’s no driver to network.
When work life is no longer your social life, how do you make friends and connect with people?
Not the questions you thought you’d be contemplating with your new found financial independence, but seriously have a think about it.
I’ve made a lot of friends chatting over the front fence of our new home in rural Tasmania. That was unexpected and it’s been kinda fun.
How are you going to build your social networks when you’re financially free?
5. Your calendar is wide open
It sounds simple until you really think about it. When you’re financially free and don’t have to work for someone else anymore, your entire day is up to you! There’s no-one telling you what to spend your day on.
While the thought of this drives a lot of people to want financial independence, the whole concept of filling your own day every day can be a bit bizarre at first. Especially if you’ve worked a job your whole adult life.
What’s also odd is that all of your existing mates or friends are at work! So you can’t rely on them to keep you amused.
What to do, what to do?
This honestly probably scares a lot of people out of quitting their jobs, even though they have the finances to do it.
But we are here to say the world is diverse and so are your interest! You just have to form them again! In a world where the majority of folks commit 70% of their daylight hours each week to work, it’s easy loose sight of our interests and personal pursuits.
Financial independence is weird because it makes you think differently about your day, your week and what the rest of your life will hold. Get creative!
6. The ‘tall poppy’ takedown
If you haven’t heard of this, Tall Poppy Syndrome is an unfortunate part of the Australian psyche.
Google defines it as “a perceived tendency to discredit or disparage those who have achieved notable wealth or prominence.” It’s generally a tendency to cut people down for your achievements.
It’s a weird part of our culture and massive backfire to our collective success down under, but we do it anyway.
If you’re financially independent, there are times you’ll be a target, from friends, family, randoms, and particularly trolls online. It’s a hole bunch of crazy, but we’ve certainly come across it. So you can understand it and be prepared – here’s an article about how to deal with tall poppy syndrome.
How to navigate the oddities of financial independence in Australia
Here’s what we’ve learned to help navigate the weirdness that comes with attaining financial independence. No one really shares this perspective, so we hope it helps with your transition when you do get there.
Get ready for the questions!
“So, what do you do for a living?”….You’re going to get this question so best prepare for it. Think of all of the random forms you need to fill out in your everyday life that ask you about your current employment. What are you going to say?
If you’re like me it’s hard, after a great career, to swallow the words ‘I don’t work’ or ‘I’m retired’. We Australians are simply pre-programmed to equate not working with failure. And it’s simply not true. I’m as busy today as I was on an average work day. I’m just busy doing things I want to do! I still create jobs, help grow the economy and pay my taxes. I’m still a useful member of society, just not in the way most people are used to.
Here are some suggestions that I use when people ask me what I do:
“We’re self employed”
“I quit the workforce to work for myself”
“We’re full time investors”
“I work online”
What answer is going to work for you, when you no longer work for someone else?
Revive your creative interests!
I’m a learner. I love learning anew and I love sharing what I’ve learned. I’ll talk your ear off about all of the cool things I’ve taught myself since reaching financial independence – things I never thought I could ever do!
I’ve plumbed a water tank. I’ve built a wood stack. I’ve built bookshelves and grown a garden full of fresh food. I’ve up-cycled numerous bits of furniture into beautiful new additions to our home.
I’ve built this website, from zero prior knowledge!
Write down everything you used to love as a child, when you were single, or before you had kids.
What jumps out at you?
Seek out ‘your people’
If your friends are at work 5 days a week, you might need to find a new tribe in alternative places. That’s ok!
So where can you look? Online!
Facebook groups can point you to local community pages where you’ll meet great people. You can also find other FI enthusiasts in these groups – you may find some of these are your people.
Twitter. We’ve found loads of people with similar interest on Twitter. We don’t meet up with them IRL but we do follow them and chit chat on the blue bird.
Forums. There are a tonne of online forums covering some whacky topics you wouldn’t even believe. Get on, join in, contribute.
Online communities. These pop up like parsley in our veggie garden on apps like Discord and Clubhouse. They are a great place to meet people and find your tribe.
Be open to new experiences
This sounds weird but when you get to financial independence, learn to say yes more than you say no.
I’m an introvert. Now I chit chat to random tourists who pull up at our front fence to take photos of our novelty letterbox and wild Tasmania views.
I’m a highly educated, multi-lingual, ex-diplomat, white collar professional. From time to time chew the cud with local farmers and wonder through neighbouring paddocks helping to stack hay.
Lay your biases to rest. Let go of any preconceived notions of who you are or who you think you need to be.
Instead, open your eyes to new world views and new kinds of people. Do different on purpose.
I promise this will enrich your life in ways you don’t expect.
Plan your purpose
While you build towards financial independence, think about what your purpose is in life. What drives you? Exactly what do you enjoy? What gets you excited to wake up in the morning. Is there a topic you inevitably stray to when talking to friends about over drinks at night? What do you want to contribute in life?
Work this out before you quit the rat race, and then write it down.
Not only will it help you make the leap to financial independence, but it will soften the landing when you do get there. It will help smooth out the weirdness, fill you calendar and give your new social life some direction.
The point of this post is to highlight the culture shock you’re going to feel when you reach financial independence in Australia, and spend a bit of time there. Life is just a bit different on this side of the fence. We hope this helps prepare you for the transition. And for those fearful to make the jump, we hope it can alleviate those fears. After all, time is your true wealth. When you work out what you want to do with yours, it’s all riches from there!
Smart real estate investing is a superpower. Master it and you can have an income to live off for life and enough capital growth to secure your financial future. Learn about investing in apartments for financial freedom in just 10 minutes with out top 8 investing tips.
Let’s hit it!
Living off rental income
What to avoid in an investment property
The problem with negative gearing
How to quickly identify a cashflow positive property
Our top tips for investing in apartments to live off the income
The best advise you’ll ever get on investing in apartments – summary
Living off your rental income
Living off rental income is part of the property investing holy trinity.
It’s when your rent covers all of your costs to hold the property, and then some. In investing terms, this kind of property is known as ‘cashflow positive’. Once your investment is cashflow positive, you get money in your pocket each month. Money you don’t have to earn from a day job. Huzzah!
There are a lot of moving parts to this equation playing out, on both the expense and the income side of your investment.
Firstly, let’s examine your holding costs. Many folks make the mistake of thinking it’s just your mortgage. Without a doubt your mortgage will likely be your largest cost and the biggest determinant of whether a property is cashflow positive. But remember, holding costs also include rental agent fees, city taxes or rates, accounting costs, fixed water supply charges (in Oz), tax accounting costs, advertising costs, vacancy allowances, and repairs and maintenance!
The last three on that list can be a cashflow killer if you haven’t factored them in.
On the income side the most important factor for cashflow is your ability to maximise rent, often by going above and beyond what the average investor is willing to do, or does.
What to avoid in an investment property
The opposite of ‘cashflow positive’ property is ‘negatively geared’ property. Negative gearing is a fancy term to try to make it sound strategic for your property investments to take money out of your pocket each year. You are ‘negatively geared’ when your property produces a loss which can then be used to offset your income tax at the end of the year (producing a tax saving).
Negative gearing may reduce your income tax bill, but that saving is premised on you making a loss on your cashflow at the end of the year! So the question is: why o why would you buy and hold an asset to lose money on it each year? Let’s look at why people buy negatively geared property.
1. Capital gains
The main argument for negative gearing is that the value of the property will grow more than your loss to operate it each year, leaving you net better off. Here’s a demonstration:
Single story home mortgaged at 80% LVR
Cost to purchase (excl. stamp duty & other fees)
Median annual growth (5 years)
$20,000 (4% / yr)
Mortgage costs (3.85%)
Agent fees (8.5%)
Total operating cost per year
Owner’s cost to hold
Tax deductions on loss (@ 37% tax rate)
Total operating loss
Total return after capital gains
$12,072 ((-$7928 + $20,000)
You can see in this example that he owner is $12,072 better off at the end of the year if the property grows by its 4% historical growth. This is after costing $12,583 out of pocket to hold the property over that time. That’s a BIG IF in our view and there are much smarter ways to invest in property & build a property portfolio.
2. Time in the market
The second reason people buy negatively geared property is because they believe by paying down the mortgage and increasing rents, the property will become cashflow positive over time. Over 40% of Australian investment properties are said to be paying their owners an income after holding costs.
But if you dig deeper, many of these properties have been held for at least a few years, most for more than 5. The investments have become positive cashflow over time.
For their first years of ownership however, the vast majority of Australian investment properties are negatively geared and actually cost their owners money! And a lot of first time investors can come unstuck in this period, especially if their personal income, rental income or mortgage situation changes!
Depreciation is an additional tax deduction on building, fittings and fixtures. Depending on the age and condition of your property, depreciation gains can be significant (but generally decline over time). For example, one year we received around $5000 in depreciation benefits on a 1970s brick and tile property we held until recently. To claim depreciation benefits, you need to engage a professional to do a deprecation report. Not all properties are eligible for benefits.
Deprecation lowers your taxable income, so it further reduces operating losses in negatively geared properties. In some cases, depreciation benefits can turn a negatively geared property into a positively geared property. This can happen if your depreciation benefit is > cost to hold – other tax deductions.
In the example above, if your depreciation is > $7928 (-$12,583 + $4655) then the property would be ‘positively geared’ at the end of the year.
In this example, you will have money in your pocket at the end of the year after tax. You will still be out of pocket during the year to hold the property. One problem with depreciation as a strategy is that you don’t know what your deductions are at the time you buy the property (unless you fork out for a report).
The problem with negative gearing
Where to start! We’re not fans of negative gearing as an investment strategy for so many reasons. Here are some of the biggest:
The out of pocket cost. Can you afford $12,000 out of pocket ($1000 per month) to hold an investment property during the year? A lot of families trying to get ahead just can’t.
The risk. Your losses can blow out easily – particularly if rents decline, vacancy rates increase or mortgage interest rates go up.
It’s reliant on historic property market trends. Ever heard the line ‘past performance is not an indicator of future growth’? What if your investment doesn’t grow by 4% per year over the time you hold it?
It’s harder to grow an investment property portfolio. Losing cash each year will impact your ability to service additional loans, if you want to add to your investment portfolio.
There are smarter ways to invest in property!
How to quickly identify a cashflow positive property
Cashflow is important in property investing because it helps you hold the property without stress, minimise financial risk, and grow your portfolio. If you’re aiming for financial freedom, a positive cashflow property or two can be a game changer and speed up the time it takes to get your financial freedom.
But how do you quickly identify whether an investment will be cashflow positive?
In Oz, we apply what we call ‘the 10% rule.’ You can apply the 10% rule to a property’s gross rental yield when you’re out looking for your next investment. But it is just a rule of thumb. It’s always best to use it that way and do full due diligence before you invest.
As you do your research, what you will find as you scour through real estate ads and data, is that very few areas (at least on Oz) have rental properties returning a gross yield of 10%!
And this is exactly where apartments come in!
Why invest in apartments?
Firstly, we’re not talking about investing in just any old kind of apartments. We’re talking a specific type of apartment, in certain areas with certain features. If you follow our tips, investing in apartments can definitely be cashflow positive and pay you at the end of each month. They can also appreciate in value and provide options to take equity out of your investment over time.
We know all of this because we invest in these types of apartments and live off the income.
So lets get to the juicy bit 🙂
Our top tips for investing in apartments to live off the income
We’re about to run through the type of apartment investment that we hold and that pays us an income each month Before we start – this is not a straight forward or a passive investment strategy. If it was easy, everyone would be doing it….
So here’s our best advice you’ll get on investing in apartments:
Buy multiple apartments on a single title
Buy ‘walk-up’ apartments
Buy brick or cement
Find a cosmetic renovator
Buy occupied apartments under market rent
Supercharge your income
Buy in a trust with a company trustee
Now let’s break down what exactly we do and have learned from experience:
1. Buy multiple apartments on a single title
This is critical, so we’ve made it number 1 on the list.
Buy multiple apartments on a single title, ideally on one registered parcel of land (or Lot). We’re talking about investing in a Duplex, a Triplex or Fourplex. Buying multiple apartments on a single title increases your rental and value add opportunities. We’ll get into this further below. It also lowers your buying and holding costs compared to buying single or multiple apartments, each on their own title.
We recommend stopping at four apartments. Anything over four apartments and you start entering the realms of commercial lending (at least in Australia), which can complicate the loan process and make loan criteria harder to meet.
Four key benefits of a single title apartment block
It’s cheaper to buy – buying multiple apartments on a single title incurs lower buying costs than a block of separately titled apartments. Since buying costs such as title registration, mortgage insurance and stamp duty are all attached to property title, you pay these fees once for multiple properties. Buying multiple apartments on a single title can save tens of thousands of dollars in the buying process.
It’s cheaper to hold – expenses such as water bills and council rates (city taxes) are much lower with a single title apartment block. Rates are attached to land parcels (lots) in Australia. A block of units on a single title over one lot attracts much lower council rates each year. You also pay less in fixed water charges, which landlords foot the bill for here in Oz. Multiple titles equals multiple water connection points, each with a separate water bill.
Multiple rental streams – high vacancy rates can kill a good property investment dead in the water. Dual income properties help you manage this risk through diversified income streams. When one is vacant, you have rent from the other and so on.
House hack and live for free: You could even live in one apartment and have tenants pay your mortgage. A $500,000 duplex with $400,000 loan gets you $1213/month rent. Your principle and interest repayments are $1876/month. Your rent is $153/week! You’d need to be onsite manager to realise this outcome but it’s doable.
Subdivide – You can subdivide the right duplex, triplex or Fourplex. Subdividing is the process of putting each apartment on a single title (often called ‘strata title’). This allows you to sell one or all apartments separately if you want to. Why would you do this? Firstly, to increase a valuation on your investment. Three separately titled apartments will often reach a higher book valuation than a triplex on a single title. A higher valuation allows you to draw equity and keep investing…. Secondly, to access capital from your investment. If each apartment is on a separate title you can sell one or two apartments and take some cash off the table.
Note, there are certain features a property must have if want to subdivide in the future for a profit. But that’s a whole different article right there 🙂
Together, these 5 factors increase your potential for positive cashflow, organic growth and manufactured value – the property investing ‘holy trinity’.
2. Go regional
Property markets have experienced some pretty wild growth in 2020 and 2021. If you’re looking for an investment property right now, it’s highly likely that Duplex, Triplex or Fourplex apartments in tier one cities are out of reach. Unless you have a cool $1.5M…
The good news is, people still need a place to live in regional areas! Regional areas offer a lower buy in price for these types of properties. A LOT lower! You can still pick up Dduplex or Triplex in regional areas with sound local economies for around $650,000.
All of this bodes well for your chances of getting into the duplex or triplex market and of achieving a decent rent. In our view, regional areas with diverse and growing economies are great markets for investing in apartments as unit blocks.
3. Buy ‘walk-up’ apartments
A lot of folks were turned off apartment living during the pandemic. Apartments with shared lifts, facilities and common spaces definitely had a stink about them. People wanted distance from their neighbours. This is where ‘walk up’ apartments come in. A ‘walk up’ apartment is an apartment accessed by stairs or located the ground floor, with its own private entrance and facilities. This means they work for social distancing – ‘pandemic proof’ in a sense.
Walk up apartments were mostly built in the 70s in Australia, at a time when there was just more ‘space’ around and less people. They’re often larger internally than contemporary apartments. Updated walk up apartments can be appealing to renters for this reason.
Look for walk up apartments with minimal common areas. Individual rather than shared laundries, parking and outdoor areas is what you’re after.
4. Buy brick or cement
Earlier we mentioned that maintenance and repairs can blow out to your costs to hold a property. Multi-unit properties can exacerbate this as there are more kitchens and bathrooms, which is where the bulk of maintenance and repairs occur. So when you’re looking to buy, opportunities to reduce maintenance and repair bills are the same as money in your pocket.
One way to lower these costs is buy brick veneer properties instead of timber buildings, which require far more maintenance for wood rot, painting etc. Brick buildings typically require less up keep, making it easier to cashflow the property. You’ll also have a greater chance of retaining tenants with brick construction because shared timber walls can make for very noisy living.
5. Find a cosmetic renovator
Cosmetic renovations involve simple upgrades like cleaning, paint, flooring, window furnishings and tidying or landscaping gardens. Cosmetic renos are a great way to add value to an investment property for relatively cheap. They can also lead to higher rents and better cashflow.
When you renovate a Duplex or Triplex, there can be economies of scale in the renovation cost as well as a multiplier affect on rental increases. Win win for both value and cashflow! Just remember you need to have some extra money left in the bank for renovations after buying the property! Also, talk to your account about the timing of your renovation before you buy. According to Upside Accounting you need to be really careful what work you do to a property in the first 12 months of owning it as ‘initial repairs’ are not tax deductible!
6. Buy occupied apartments under market rent
You have to do some market research to get this tip right, but it can be worth it. What we’ve observed is that some landlords are reticent to raise rents on long term tenants that ‘look after the place’. We’ve also found that somewhat dated properties can also be rented at below market rates.
These are exactly the kind of duplexes or triplexes we love! You’re looking for an opportunity to raise rents significantly, without spending a lot extra to do so.
Tips 5 and 6 go hand in hand many times, and can turn a borderline investment into a cashflow positive one. Something to note is that you may need to move existing tenants on for this strategy. Firstly, to renovate. Secondly, because in many states there are limits to rent increases at lease renewal. These limits don’t apply to new tenants and leases. Instead, you’re free to find a new tenant and set your rent at or above market rates.
7. Supercharge your rental income
Renters will pay more rent for certain amenities. Understanding what these are, and the mark-up for them in your area, presents opportunities to supercharge your rental income. Examples include providing furnished rentals, renting to students by the room, or installing amenities like air-conditioning. You might also consider opportunities for short term rental accommodation, which for us has been the ultimate supercharge strategy and helped us get to financial freedom!
8. Buy in a trust with a company trustee
This is a no brainer if you want to build a property portfolio, protect yourself legally, and minimise tax. A properly structured trust with company trustee can help lower your tax bill significantly, protect you from legal liability, and help with estate planning if you want to transfer asset ownership among family members. Be warned, you will need to lodge separate tax returns for the trust. This will cost extra in accounting fees, which you should also add to the cost of holding the property!
For us, the tax advantages of using these vehicles have produced at least a 10x return on our accounting costs… Wooorrth iiiit!
The best advise you’ll ever get on investing in apartments – a summary
To recap, if you want to live off rental income then investing in apartments may be the strategy for you. But you’re not looking for just any apartments. You’re looking for multiple ‘walk up’ apartments on a single title and lot, located in regional areas. Properties that are: brick construction, in need of cosmetic update, and currently rented below market rates. You’ll need to have some money on the side to update the property and the gumption to move long term tenants on as part of this strategy. Oh, and don’t forget to buy in a trust and look for every opportunity available to supercharge the rent!
Always do your own research into the local rental market and economy. Always crunch the numbers before you buy!
We own a triplex in our investment portfolio and live off the income it provides. It’s almost doubled in value in 10 years and we still have the option to subdivide with pretty minimal cost if we want to sell.
This is active investing but if you want above average results, you can’t just do what the average investor does (buy negatively geared property).
We genuinely feel we’ve that this is some of the best information about investing in apartments on the internet. We hope it helps you on your investing journey to financial freedom! If you feel the same, you can help us out by sharing it around. Oh, and happy hunting!
Until next time financial freedom seekers – have fun, be happy, do good!
With real estate prices gaining 25% in 2021, if you’re not already a property owner you’re probably feeling priced out of the market. A 10% or 20% downpayment is suddenly now out of reach. So what assets can you actually afford to invest in? Cryptocurrency is filling this gap for many younger home buyers looking to grow their savings into a home deposit. If that’s you, then keep reading because in this post we share 12 different ways that you can make money with cryptocurrency. We rank each money making method from beginner to advanced based on our knowledge and experience.
If you are new to crypto and ready to take the plunge, this post will help decide just where to allocate your time.
For all of these methods, you can start with $100 or $1M. Crypto doesn’t differentiate – there are opportunities for anyone, no matter your finances.
Test your crypto savvy first!
12 ways to make money with cryptocurrency
Where to start with cryptocurrency investing
3 beginner tips to manage risk early
How to protect your crypto wealth
Test your crypto savvy first!
Before we get on with making moolah, let’s find out how crypto savvy you are so that you can work out which strategies might suit you best.
You’re a beginner if don’t have any crypto or digital assets but want to get started. Answer these 5 questions to find out if this is you:
Can you buy, send, and receive crypto from an exchange to your crypto wallet, including on different networks?
Can you connect your crypto wallet to a DeFi protocol, deposit your coins and then disconnect your wallet and all approvals?.
If you answered yes to all of these questions – congratulations! 🙂 7 of our 12 money making strategies are out there waiting for you.
If you’re not at this level yet, download our Quickstep Guide in the right menu ->.
Then follow the ‘4 steps to get started’ and ‘3 tips for beginners’ at the bottom of this post. This will get you sorted to Beginner level and answering yes to all of those questions!
A competent investor is someone who has been around crypto for at least 12 months and is building a digital asset portfolio. If you can answer yes to these questions, consider yourself (at least) a competent investor:
Are you semi-active in managing your crypto asset?
Can you confidently navigate the DeFi ecosystem – how to buy, sell and send crypto?
Have you already staked coins and earned interest through lending?
Do you use MetaMask and other wallets regularly?
Do you know what a blockchain explorer is and how and when to use it?
Do you know the risks involved in different types of DeFi products and crypto?
Have you bought and set up a hardware wallet to protect your crypto wealth?
If you answered yes to all of these questions – huzzah! We have 9 of 12 money making strategies that you can take advantage of (some you already are).
If you’re not quite there yet – stick with beginner level methods. Double down on your crypto research and focus on execution! Becoming an expert in one or two beginner strategies can still make you a whole lot of money!
You have already built a material digital asset portfolio. You are advanced if you can answer yes to these questions:
Do you actively manage your crypto assets on a day to day basis?
Do you have a high risk tolerance?
Are you across complex crypto products like Automatic Market Makers and impermanent loss?
Can you interpret and use price charts, trading indicators, trading patterns, and market trends?
Do you know where and how to find alpha in the crypto market?
Do you regularly use decentralised exchanges and more complex and risky DeFI products like bonding and borrowing to compound returns?
Do you know and implement risk management strategies to protect your capital and avoid liquidation?
Congrats if you’re a total crypto gun! We might not be able to teach you much, but it’s worth having a read through to see if there’s anything new here you might have missed!
12 ways to make money with cryptocurrency
Just remember, none of this is financial advice. Crypto is a risky investment. It’s a hedge against a tanking global money and financial systems and a new technology. Treat it as such. Allocate a small amount of your investment portfolio. And never put in more than you can afford to lose.
Ok, time for the big reveal! 🙂 Here are 12 ways to make money with cryptocurrency, ranked from ‘beginner’ to ‘advanced’:
Learn to earn – you earn small amounts of crypto to learn about crypto and by upvoting and posting on sites like reddit
Hodl – buy and hold coins and tokens long term
Lend – lend your crypto to others and earn interest
Stake – contribute to a staking pool and get rewarded
Compound – hybrid hodl and stake strategy
Referral rewards – refer friends to crypto exchanges, get free crypto
Airdrops – free magic internet money appears in your crypto wallet.
Spot trade – trading price action on price charts
Metaverse digital assets – you play online games or run a business in the metaverse and earn crypto as you go
Nodes – its complicated, keep reading!
Options & margin trades – complex trading products and strategies like leverage
Yield farm – exactly what it sounds like – farming for yield
Next, we’ll run through each of these in detail.
1. Learn to earn
(Investing level: Beginner)
Did you know that Coinbase and Coin Market Cap will pay you in crypto to watch videos about crypto and fill out quizzes at the end? On Coinbase, you can earn between $3 and $10 to watch a video that teaches you about different cryptocurrencies. If you’re trying to learn about crypto anyway, who doesn’t love a bit of free money? The crypto is paid into your Coinbase account, so set this up first. You’ll need to have your ID verified on Coinbase.
You can also hang out on crypto reddit, learn heaps (it’s where all the tech nerds are 🙂 ) and get paid in a crypto called Moon. All you have to do is upvote posts and post on your own. Once you have some Reddit Moons saved up, you can swap them into money IRL. Here’s a handy guide for how to get your Moons into $$.
(Investing level: Beginner)
“Hodling’ is crypto lingo for buying and ‘holding’ cryptocurrency assets over the long term (even when the price dips 50%). Hodling is generally for capital growth over multi-year timeframes. Hodlers are taking a long term view that digital assets are here to stay and in the future will make up more than their current 0.05% of to the total market cap of global assets ($2T/$400T).
Ever heard of the saying ‘when in doubt, zoom out’?
It just means zoom out on the price chart, look at the long term price action, and hodl your crypto bags!
Hodlers look at things like ‘rainbow charts’ which aim to map out where the price action might range in the future, over the longer term. Rainbow charts apply logarithmic regression techniques to price history. Here is a recent BTC logarithmic chart posted to Crypto Twitter. BTC hodlers will point to the long term upward trend on this chart and keep hodling if the price action stays within the upper and lower bounds of the rainbow band.
We hodl cryptocurrencies that we consider to be ‘blue chip’ plays. If you take a look at this post about the best crypto for exponential growth, you’ll get an idea of some of our ‘hodl’ bags.
3. Lend (earn)
(Investing level: Beginner)
Lending is how you earn interest in crypto. Who doesn’t love a little passive income?
It’s similar to the traditional high yield savings bank account where you let the bank use your money and in return they pay you interest. But.. .in crypto you’re not lending your money to the bank. There are a couple of different lending models:
a) Decentralised lending – you lend to other people (P2P lending) via a ‘lending pool’
Here is an example of how P2P lending works. In this example, we lend US Terra stablecoin into a lending pool governed by the Anchor Protocol. Anchor pays us 19.5% interest at the moment. You can even take out insurance on your deposit in the Anchor smart contract. Check out our post on how to use Anchor Protocol here.
There are heaps of P2P lending pools in DeFi. You need to make sure you DYOR before your put your hard earned money in as you don’t want to get rugged!
b) Centralised lending – you lend to a company
You can also lend your crypto to a company (like Celsius or BlockFi). They use your crypto to engage in various crypto investing and lending activities, and pay you a cut of their profits.
The Celsius interest rate on Stablecoins like USDC and USDT is around 8%. If you want to join Celsius, use our link and you’ll get $50 in Bitcoin. All you have to do is set up an account, transfer $400 worth of crypto in and hold it there for 30 days. You will pay network fees (gas) to transfer your coins into Celsius so we’d recommend starting with at least $2000 worth to make sure you’re in the money. The free Bitcoin should help with gas fees also.
It’s important to know that no-one has lost their money because of the regulators bans – existing customers are grandfathered.
(Investing level: Beginner)
Staking is like lending because you do it to earn interest or rewards. But with staking, you are rewarded for contributing your crypto to a ‘staking pool’ run by a blockchain node operator.
Blockchains rely on decentralised nodes to operate and validate (as correct) each block (group of records) in the chain (ledger). The act of validating blocks is rewarded with native coins that come from the fees users pay to use the blockchain.
Proof of Stake blockchains generally require node operators to stake a bunch of native coins to run a node. Staking pools are akin to node operators crowd sourcing these coins. The more coins node operators have in their pool, the more likely they will be selected (by the blockchain software) to validate blocks on the network. For each block they validate, a node operator is rewarded in native coins. They then share their rewards with everyone that stakes in their staking pool.
The easiest place to start staking
It sounds complicated, but it’s really not.
If you have coins on Binance its literally two button clicks to stake your coins and earn rewards. The APY returns can be in the double digits – some of our coins are earning more than 20% APY on Binance. There are also triple digit returns (for riskier coins).
The thing to know about staking is that there is flexible and locked staking. Locked staking usually pays more. But you’re locking your coins up in the pool for a period of time – usually 30, 60 or 90 days. If you redeem your coins before the end date, you forfeit your rewards.
Also, the higher the APY, the riskier (more volatile) the coin or project. You can buy a coin and stake it, and earn 2500% APY. But with it there is a good chance the underlying value of the coin goes to zero or close to it. 2500% interest on $0 is … $0. Manage your risk accordingly.
We stake on Binance because it’s just super convenient between trades. You can start on Binance with this link. We get a small commission on your trading fees if you do. It’s a nice way to thank us for the post, don’t you think?
(Investing level: Beginner)
Compound strategies are when you hodl strong performing cryptocurrencies and stake them or lend them out at the same time. Here’s an example:
We are investors in LUNA, which is a Layer 1 cryptocurrency blockchain. LUNA has provided us with some good capital gains and we think it’s a strong and growing ecosystem. We’re going to be holding it for some time. So while we hodl LUNA, we stake it. We have some of it staked in Binance and some in different LUNA dApps. We get exposure to LUNA’s price growth over time and while we hodl it, we’re getting around 10% to 25% interest.
What blue chip stock do you know that returns a 10% to 25% APY dividend? Welcome to crypto! 🙂
The easiest way to deploy this strategy is using Binance. Remember to join Binance with our link, so you save on transaction fees when you buy and sell coins.
6. Referral rewards
(Investing level: Beginner)
Referrals aren’t going to make you rich in crypto, but it’s a nice passive way to earn some coins, which you can then compound in to more coins. Huzzah!
A lot of crypto exchanges will offer you a referral fee if you bring them new sign ups. The way it works is, you sign up with our referral fee to get a bonus. You then offer the same referral program to your friends and family to sign up, and you get the referral fee.
You can get anywhere from $10 to $50 BTC for referring new customers. Free money for doing not much at all!
Here’s a list of crypto exchanges or products that have referral rewards, and our referral links to set up an account with them! Muchos Gracias financial freedom seekers!
This is basically when a crypto project or exchange sends free crypto coins or tokens into your crypto account or wallet. Sounds pretty fly, right?
Airdrops of kind of like a shareholder dividend in traditional markets – a premium payment for holding a particular coin.
Airdrops are used by projects as a way to coax investors to invest in their project and buy their coins. Airdrop announcements can push the price of a coin or token up in the lead up to the Airdrop.
Sometimes you have to take some kind of action to qualify for an Airdrop, so pay attention to the Airdrop instructions. Here is one example of how an Airdrop might work: Binance will announce an Airdrop with instructions in their App. The instructions say that they will take a snapshot of all Binance accounts on a certain date at a certain time. Any holders of a specific coin (Coin A) captured in the snapshot get airdropped free tokens (Token B) into their account.
Other times you need to connect your crypto wallet up to a specific project website at a certain time to be captured in the snapshot and receive the Airdrop.
Airdropped coins and tokens aren’t usually worth a lot of money at the time of the drop. But they can grow in value (some significantly) over time.
8. Spot trade
(Investing level: Competent)
This is just trading the price charts like you might in traditional markets. The main difference with spot trading crypto is the wild swings, both up and down, that traders can take advantage of. These wild swings of 20% in a single day mean that you can make good money with just a few solid trading techniques provided you know them well. You don’t need to be a professional trader necessarily.
You DO need some good risk management trading skills so that you don’t lose your undies because of these price swings. This is why overall we have it ranked trading as ‘Intermediate’. If you don’t know how to read a price chart, identify a trading pattern, set a buy, sell, take profit or stop loss order – stay away!
9. Metaverse digital assets
(Investing level: Competent)
Don’t click away yet just because you read the word metaverse! I know, I know the very thought of a virtual reality world has some people’s eyes glazing over. But just hear me out. Because before long we’re going to see mainstream media introducing the first Metaverse millionaires. Do you want to be one?
Some Metaverses come with virtual economies where you can buy digital assets just like you can IRL, and use them to generate revenue. You purchase the digital items as NFTs and can deploy them in that native metaverse. For example you can buy NFT petrol stations, shops, cars, stadiums – and use them to generate income like a real business might.
Right now you can buy a taxi in the Metaverse ‘Polkacity” for 1ETH (around $2000). You then use this taxi to ferry people around in the Polkacity Metaverse and earn their native token POLC. You can sell your digital assets to others and you can swap the POLC you earn for other crypto, like Ethereum, and then into dollars. So Metaverse money turns into real money.
There are a few things to know about Metaverse earning.
You have to purchase the assets – so you’re investing in the game and its future. You only make money from your asset if other people are in the Metaverse!
You earn in native coins that can go up or down in value. The coin price can significantly impact your ROI, especially if the price tanks. You may get rich, or you may never get your investment back.
Most of these VR worlds are early stage, some of them still in beta. Which ones catch on and which die a tragic death is uncertain.
This all means that it is risky to buy in. Game makers have been successful enticing early participants into their virtual worlds by paying high interest rates (in native coins) for holding their NFTs. APYs in the hundreds of percent are not unusual to attract users.
(Investing level: Advanced)
The jury is still out on whether nodes provide a sustainable and long lasting passive income stream. Let’s take a look at node income starting with the basics.
What are Nodes?
Nodes are decentralised points in a blockchain network that help run the blockchain by validating transactions (validator nodes) and storing data (full nodes). Essentially, nodes help carry out certain functions and help the performance of the blockchain.
Sometimes, depending on the type of node and the network, a node is deployed via a piece of hardware that looks like a hard drive, and supporting software and server set up.
Other times nodes are deployed in the Cloud. Cloud-based nodes are often referred to as Nodes as a Service (NaaS). NaaS support Blockchain as a Service (BaaS) – which is private blockchains for companies, run by BaaS providers in the cloud. BaaS is a new and fast growing market. Think of Software as a Service and you’ll start to get the idea.
How do nodes generate passive income?
The concept is that nodes are paid for helping the blockchain operate. But where does the money come from? The answer is, it varies by node type.
For validator nodes, their revenue generally comes from the fees that users pay to use the network. To run a validator node isn’t easy. You need specific technical knowledge and hardware to do it. If you invest in validator nodes (as with staking in proof of stake protocols), you share a portion of the node revenue.
BUT… full nodes are currently not paid in this same way. Many are still in the ‘proof of concept’ phase in terms of proving their value to blockchain providers. This is a catch 22 because NaaS providers need full nodes up and running to prove their worth. But running full nodes costs money. So to get nodes up and going, NaaS providers need investors to pay the full nodes.
Rewards pools for full node investors
Without a revenue source to draw from, the solution has been to reward full node contributors via a rewards pool funded by project tokenomics. That is, investor returns come from a pool of money provided by other investors and any side revenue streams. A portion of the funds provided by new investors goes to sustaining the rewards pool. If the investors dry up, the rewards dry up. Sounds like a Ponzi scheme, but real revenue may also be just over the horizon…
This is why full nodes, as a form of passive income, are both risky but have lots of potential. If investors remain committed to NaaS projects and the project teams can demonstrate their use case, NaaS will grow alongside BaaS. But then again, this might not happen.
We currently run a full node for the ETH blockchain and earn passive income from it. We will report back soon on how that investment is going. Stay tuned!
11. Trading options and margins
(Investing level: Advanced)
As with stocks, these products are for more advanced traders. Options allow you to ‘short’ coins and make money if the price goes down. Margin allows you to leverage other peoples money to trade, which amplifies both gains and losses.You can get access to these products on centralised exchanges like Binance and Kucoin.
We don’t use these strategies as we’re not professional traders. Only head for these options and margin trading if you’re willing to learn them in detail and take very large risks.
12. Yield farm
(Investing level: Advanced)
Yield farming is a way of generating two interest payments on the one investment. Sounds too good to be true and sometimes it is. Here’s an overview of how it works:
Decentralised exchanges and protocols need liquidity so that their users can swap different coins on their platform
You can become a Liquidity Provider (LP) for these exchanges by contributing your crypto into a liquidity pool. You usually contribute two different coins or tokens at a specific ratio. For example, you might provide liquidity into a DAI/ETH pool by transferring both ETH and DAI into that pool. The pool will determine the ratio of the coins you contribute – for example 1:1.
In return for providing liquidity into the pool, you’re given LP tokens equal to your liquidity deposit.
You earn two interest payments by:
providing the liquidity into the pool (so that others can use that liquidity to trade) in the first place. You get a small percentage of the trading fees, and
lending your LP tokens on other decentralised protocols and earning interest on them.
The important thing to know about yield farming is that it’s complex, not at all passive, and you can risk losing your money through something called ‘impermanent loss‘.
This is more advanced and there’s a bigger risk you’ll lose your pants if you don’t know what you’re doing. Yield farming is for the intrepid crypto journeymen and women. Make sure you fully understand how it works first if you decide to dive in.
Where to start with cryptocurrency investing
1. Start with our quickstep guide
If you’re back at square one, we have a free quickstep guide on how to buy, move & secure your crypto assets. Check it out right of screen ->
This guide will get you set up with online security, an account with a cryptocurrency exchange, and an idea of how to buy your first crypto. All in just 2 pages.
2. Set up an account with a crypto exchange
Binance – You can hodl, lend, stake, trade and participate in Airdrops directly using Binance. We find the Binance Wallet the easiest to use all-in-one crypto exchange. It’s a great place to start out making money with cryptocurrency. Read our Binance review if you want to know more about its best features for crypto investing.
Coinspot – We recommend Coinspot for Aussie investors as you can buy loads of coins directly with AUD. It’s also a nice easy interface. It doesn’t have any staking or interest bearing products however, so you can’t do much more than hodl.
Coinbase – If you’re from the US where there are restrictions on using Binance, you can set up a Coinbase account. We find the fees are higher on Coinbase and there are not as many coins listed or different investment products available (as Binance).
Kucoin – You can also set up a Kucoin account as a US citizen. Neither Coinbase nor Kucoin are as easy to navigate and use as the Binance app and they don’t have as many products (or money making opportunities) on offer when it comes to staking and earning from your crypto.
3. Learn about crypto
Check out our other posts on investing in cryptocurrency and making money with decentralised finance. Or read through our articles on NFTs and digital tokens. The more you know, the further you’ll go.
If you’re smart, you can even earn to learn on Coinbase or Coin Market Cap as you go!
4. Experiment with the ecosystem
Decide which strategies are right for you and give it a go!
Transfer some fiat into your Binance account.
Buy some coins and tokens.
Use the products and services Binance has available to see how it all works.
Send some coins to your MetaMask or other crypto wallet.
Connect your MetaMask to a DeFI protocol and stake some coins. Unstake them.
Once you understand the basics of the crypto products you’re interested in, branch out to decentralised exchanges, dApps and even bridge to other blockchains. Experimenting will help you learn how to use the ecosystem to make money. Just beware that crypto is miles apart from the traditional financial system. There are risks and pitfalls you need to know about before you start. To help with peace of mind, here are 3 tips to manage risk when you first start dipping your toes in:
3 beginners tips to manage risk early
1. Start with small amounts
it’s not as easy to transact crypto as it is with traditional finance. Why? Here’s just a few examples:
Denominations are not in USD or AUD (for example BTC denominations are called ‘Satoshis’),
you have to get the hang of using wallets, blockchain networks and public and private addresses.
You also have to custody your own coins. There is no one there to call if you send your coins to a wallet and they don’t arrive.
With all of these things to learn its pretty easy to make a mistake and lose your coins. So start small! Small transactions are best until you’re confident you can use crypto infrastructure well.
2. You don’t have to start on the Ethereum blockchain
A lot of people start on the Ethereum network because it has the largest volume of dApps and protocols built on it. But it’s very expensive to use and can make experimenting costly. Ethereum really only makes good financial sense if you’re investing thousands of dollars at once. Alternative blockchain networks that you can use to start exploring crypto and DeFi are LUNA, AVAX and Binance.
3. Learn how to read blockchain explorers
Etherscan, Polygonscan and other blockchain explorers are websites that provide public access to all of the transactions that occur on a specific blockchain. You can use transaction IDs to look up and trace any transactions you make. This helps you learn about how the blockchain works. Importantly, you can also use it to find out if a transaction you made on the blockchain was successful and whether your coins will make it to their intended location!
Risk management should be your focus starting out. Learn risk management practices and apply them from the beginning. Focus on protecting your capital early rather than aggressively growing your investments. You’ll thank us later!
How to protect your crypto wealth
As you build your crypto portfolio you’re going to need to secure your wealth. Crypto is a self-custody asset – there are no banks to keep your coins safe for you. But exactly how do you keep your crypto assets secure from theft and loss? Here is a quick run down of the minimum security measures you MUST take to protect your coins as you build your crypto nest egg:
1. Device security
Device security is your first like of defence. Set up security for your phone or computer as this is where you’ll interact with cryptocurrency.
Firstly, you should set up up a password protector or manager for your various crypto accounts and online passwords (how many times have your passwords been exposed in a data leak?). Something like LastPass is free and effective. Then set up two factor authenticator in your device settings and download a 2FA app like Google Authenticator.
2. Hardware security
Next, buy and set up your cryptocurrency hardware wallet.
To really protect your cryptocurrency you need to keep your coins offline where they are not exposed to cyber hack. Online wallets and exchange accounts are not the safest place for your nest egg. A hardware wallet will allow you to sign transactions from your wallet but keep your private keys offline. This protects your crypto from being hacked and stolen.
We recommend getting hold of the Ledger Nano X or the Trezor Model T hardware wallets. Using a hardware wallet is simply the only way to really protect your digital wealth.
You can check out the Ledger website and purchase the Ledger Nano X here.
While your hardware wallet will safely store your private keys and keep your coins safe, what happens if you lose your Ledger or Trezor? Y
The good news is that you can recover any lost coins.
To do this, you need the recovery phrase (seed phrase) generated when you set up the lost wallet. You can only ever recover the contents of your hardware wallet if you have this phrase. Think of this phrase as a master key for back up situations.
Some folks write their recovery phrase down but paper is a very risky medium. What if you lose it or it gets destroyed – wet, ripped up or accidentally tossed away? This is why we use seed storage wallets, otherwise known as ‘metal wallets’, to store our crypto recover phrases.
We suggest using the BillFodl metal storage wallet to store the recovery phrase to your Ledger or Trezor hardware wallet. We use it and it’s easy and pretty cool. You can buy the BillFodl direct from i’s maker Privacy Pros.
April 29, 2021 was a big, big day in the evolution of digital assets and blockchain technology. Why? It’s the day an ape NFT made its first million bucks and redefined the concept of ‘asset’ as we know it. Here’s a rip-snorter of a story about how culture and investing collided to make crypto apes millionaires. So let’s get into it.
This is an outside view of the Bored Ape Yacht Club phenomenon. We’d don’t hold any of their ape NFTs so we have no reason to drink the KoolAid or pump their bags. Bored Apes is both a microcosm and a flagship for where NFTs are right now. But our interest in NFTs is to explore how they can be digital assets – how they are bringing utility and value to their owners. As investors, we’re keen understand the bigger picture of how NFTs will monetise ‘value’ in the future. Let us bring you on the journey.
Buckle up peeps. This is the wild wild ride of the Bored Ape Yacht Club, the savvy Crypto Ape, and the best digital asset investment of 2021…
The wild wild ride of the Bored Ape Yacht Club
In April 2021, 10,000 Bored Ape Yacht Club NFTs sold out within a week of release, raising $2.8 million. Over the last 12 months, these ape NFTs have had a meteoric rise to become just about the most valuable collection in crypto. If you’re a digital asset investor and you haven’t heard of Bored Ape Yacht Club – or BAYC – get ready for a fascinating read. If you’re not a digital asset investor, this is possibly the most off-beat yet important post we’ve written on the future of the nascent asset class of NFTs.
So. How much could you have made ‘investing’ in an ape NFT back in 2021? Well, that’s exactly what we’re going to work out for you (hint: it’s a jaw-dropping amount). In this post, were going to run you through your:
Initial BAYC investment
Return on Investment
But really, this is not a post about BAYC.
If we tell the tale the way it deserves to be told, this post will open your mind to just how much crypto and NFTs have changed the concept of ‘asset’ and with it, the world of investing. By the end, you’ll better understand:
What makes a Bored Ape NFT so valuable,
Why we’ve crowned the Bored Ape Yacht Club NFT the best digital asset investment of 2021, and
Why understanding NFTs like BAYC now could be your strongest investment move of the next decade.
Before we jump in, you’re going to need to know some crypto lingo to get the gist of this incredible story. If you don’t know what ‘NFTs’, ‘minting’ or ‘Airdrops’ are, here’s a quick list to get you up to speed.
What or who is BAYC?
BAYC is first and foremost a community or club of mostly crypto enthusiasts (and some hangers-on), with a team of founding members that run it. Here are the 4 founders:
The artwork that makes up the 10,000 strong NFT collection of OG Bored Apes is collated from 170 different hand-drawn ape traits or characteristics. The 10,000 pieces of unique art are software generated to combine different traits and make each piece original.
Membership of the community is restricted, obtained only through ownership of an NFT (or non-fungible token) in the form of a cartoon ape jpeg that doubles as a smart contract (piece of software). Many of 10,000 original pieces are owned by OG BAYC minters. Although, some owners have had the cash to buy in to the BAYC phenomenon more recently.
The community congregates mostly online in its own discord chat forum, on social media (Twitter) and around the BAYC website, which outlines what the club is all about. Sometimes there are get togethers IRL, but we’ll get to that a bit later.
BAYC is many things to many people
Part of the brilliance of BAYC, and its extreme popularity, is that it is at once many things to many people. It is:
An NFT and digital asset, with the ability to hold and transfer value between owners.
A narrative (or story) to buy into / associate with / participate in (like culture or religion even)
An exclusive club membership with club events and activities.
A fun way to invest (an oxymoron to most people, so you’d be surprised at how addictive that is..)
Cool artwork for counterculture crypto “degenerates” (degens).
An online identity and status symbol PFP (profile pic) for social media, especially Twitter.
A massive socio-economic experiment in tribalism and human behaviour.
A new type of software capability to monetise ‘value’ in ways we’ve never seen before.
And these are all reasons why BAYC is our pick for ‘Best digital asset investment play of 2021’.
Next here’s a case study to explain the investment, the returns, the value and what it all means for your investing journey to financial freedom.
How much a Bored Ape NFT could have made you
To demonstrate the NFT asset class in action, we’re going to work through what an investment in BAYC could have made you in the last 12 months, under a few different scenarios.
Our calculations assume that you invested in a BAYC NFT as an OG – that is, that you minted your BAYC on 29 April 2021. We look at your return on investment depending you whether you were either:
A lucky Ape – you managed with great luck to get your hands on a rare BAYC NFT artwork, AND the rare Airdrops to BAYC members. The ‘rarity’ of an NFT can be ranked and helps determine the economic value of the NFT.
A common Ape – you got your hands on a garden variety BAYC and Airdrops. Your Bored Ape is worth around the average Price in the current market.
All numbers are from real blockchain NFT transactions, as recorded on NFT marketplace Opensea.
Your BAYC investment
When the BAYC collection was first released in late April 2021 you could mint one NFT for 0.08 ETH. With the price of ETH around USD$2000 at the time, it cost roughly USD$160. To that we add the gas fees to mint on the blockchain (to register your provable ownership of the asset).
Investment cost: USD$200 (Incl. ETH network fees)
Here is the NFT that you bought, depending on whether you were a Lucky Ape or a Common Ape:
Your initial return on investment
As we have alluded to above, BAYC has become a top tier NFT collection, with a floor price of around 90 ETH (NFTs are usually priced in the crypto token ETH as most are minted, bought and sold on the Ethereum network).
To get the value of each of these NFTs below we’ve used actual transaction data from Opensea. To get ETH/USD equivalent, we use the real transaction records on Etherscan.
Here is the initial capital gain and return on investment for your USD$200 invested on 29 April 2021:
If you had minted, and you still held your BAYC you’d now be sitting on a coveted digital asset worth at least $300,000 on the open market. If you’d gotten lucky with a rare ape, you’d be sitting on an asset worth a cool $2.26 million!
But frens, we’re only getting started with your Bored Ape journey. It turns out that your returns didn’t stop there..
The BAYC dividends
If you’re investing in crypto, you need to know what an Airdrop is. It’s sort of like a dividend that companies allocate to shareholders in traditional markets. A premium payment for the shareholder’s investment and a reason to invest in particular companies, for some people. Except Airdrops are sooo much more interesting with NFTs. This is because NFT Airdrops are programmable incentives and rewards… Let’s take a look a what this means and how it impacts your initial BAYC investment.
BAYC Airdrop #1 – The adoption drive
In mid 2021, the BAYC project team dropped their first Airdrop for members, calling it an ‘adoption drive’. Bored Ape NFT owners were given one week to claim a ‘companion’ for their Bored Ape, in the form of a dog artwork NFT. So formed the Bored Ape Kennel Club (BAKC). The NFTs were free to Bored Ape owners (on a 1:1 basis, you just needed to pay the gas fees to mint them).
Here is the BAKC NFT that you adopted, using your OG Bored Apes above:
Several elements programmed into the BAKC Airdrop made these NFTs super interesting compared to a traditional investment dividend:
Firstly, they themselves were NFTs re-sellable on any NFT marketplace. And like the OG Bored Ape NFTs, only 10,000 of the companion dog NFTs were made, each computer generated from 170 different traits or characteristics and each spun out of membership to the BAKC. So, the NFTs were rare and obtained through exclusivity.
Secondly, the smart contract embedded in each NFT file included a royalty payment back to the project of 2.5%, to be donated to a dog rescue charity. All on-sales of any BAKC NFTs through an NFT marketplace like Opensea collected this royalty payment. So the adoption drive raised funds for real world pet rescue organisations. Bingo on the warm and fuzzies.
Thirdly, the NFTs did not come with membership to the original Bored Ape Yacht Club. Bored Ape holders retained that exclusive right. So the ecosystem evolves with hierarchy and the value of initial assets is protected (and reinforced).
Lastly, the NFTs were not official BAYC profile pictures. BAYC decided that the dogs were companions to Bored Apes and not digital identities in and of themselves. This gave the NFTs a role in the BAYC ecosystem and its narrative.
The BAKC dividend return
These clever programming decisions impacted BAYC investors in 4 important ways:
Format, provenance (BAYC) and rarity gave the Dog NFTs inherent economic value as digital assets, with some more valuable than others.
Fundraising through Smart Contract embedded royalties gave the digital assets social value.
Limitations on use (as PFPs and membership access) meant these new assets did not erode the economic value of OG Bored Ape NFT.s In all likelihood, they increased that value by reinforcing the exclusivity of OG Bore Apes.
The lower cost of BAKC NFTs on secondary markets opened the BAYC project up to new participants and new funds.
Here is your dividend payment, broken out by Lucky Ape and Common Ape:
Not a bad dividend of between $20k and $200,000k on your initial $200 investment…
BAYC Airdrop #2 – Introducing the MAYC
If your mind has been blown by the capital and dividend returns of a $200 (incl. gas fees) Bored Ape investment so far, you might want to take a seat.
Enter the Mutant Ape Yacht Club.
In August 2021, BAYC released 20,000 new mutant ape NFTs. This is how the next evolution of BAYC went down:
10,000 Mutant Apes were set aside to be ‘bred’ by OG Bored Ape owners, as a way of continuing to reward these members
10,000 were offered for sale by dutch auction, to open second tier membership to the BAYC ‘ecosystem’, at a lower buy-in cost.
How to breed a mutant ape
The next evolution of BAYC not only kept the rewards coming, but continued the BAYC cultural narrative.
The Mutant Apes themselves were not airdropped to Bored Ape owners. Rather Mutant Serum NFTs were airdropped into the wallets of those owners. The serum was graded super rare (M3 – 8 NFTs), rare (M2 – 2492 NFTs) and common (M1 -7500 NFTs) and was airdropped randomly. Bored Ape owners needed to feed the serum to their Bored Ape (figuratively) to breed a second mutant ape NFT. The mutant ape would retain some features of the original bored ape, depending on which serum it ingested (M3, M2 or M1). Any bored ape can be exposed to each of the different 3 types of serum (M1, 2 and 3) once only. The serum is burned when the mutant ape is ‘born’.
There is no deadline to mutate an ape and so you can still see some serum NFTs available for sale on Opensea. Here are three for sale at the time of writing, and their ETH prices…
MAYC dutch auction
At the same time as the MAYC Airdrop, a second lot of 10,000 ‘already born’ mutant apes were put up for public sale via dutch auction with a ceiling price of 3 ETH. This opened a second tier membership to the club. Mutants were priced affordably and programmed with some, but not all, of the benefits of the OG Bored Apes.
Here is the Mutant Ape you bred, or purchased (for no more than 3 ETH):
The MAYC dividend return
The current average price of Mutant Apes sits at 22 ETH, or USD$67,800.
Since you’re a Bored Ape OG, we are going to assume you paid nothing for your Mutant Ape, just a little gas fee for the breeding. Here is your dividend payment, broken out by Lucky Ape and Common Ape:
Total return on your investment
Here’s what your total return (capital gains plus dividends) might look like, all added together.
Update: In mid March 2022, BAYC DAO airdropped 150,000,000 APECOIN into the wallets of BAYC and MAYC NFT holders. APE now powers the BAYC ecosystem. BAYC dropped 10,094 APE for each Bored Ape NFT held and 2042 APE for each MAYC NFT. If you also own Kennel Club NFTs, you get marginally more APE. After hitting $28 USDT per coin, APE is now sitting at around $9.90 USDT. If you do the math thats around $100,000 added to the treasuries of each Bored Ape NFT holder, and around $20,000 if you own a MAYC. Add this brand new dividend to the total returns calculated below…
Did the real story of these particular Apes turn out this way? It’s totally feasible, but the truth is we don’t know. However, you’re missing the forest for the trees if you think that’s the point!
The point is to really try to wrap your head around WTF is going on here that three JPEGs could have made you $3.5 million dollars within 12 months. So to help you out, here is our take…
Why is a Bored Ape NFT so valuable?
To understand this, it’s useful to reflect on the concept of value, and of what makes something ‘valuable’.
The concept of value
Value is paradoxical. It can be entirely subjective (what I desire or what is valuable to me at one price may not be to you). Yet value is also set by consensus. Something is valuable if we all agree it is so. Characteristics like rarity, provenance, utility, beauty, trust/authority, and sentiment might all contribute to a consensus view of value.
At its core, something is valuable if an individual and a collective agree it is so. Gold, the US dollar, rare art pieces are all examples of this.
If you can understand this paradox, then you can start to wrap your mind around how an Ape JPEG that you or I can “RIGHT CLICK COPY” can be valued by the market at $2.6 million dollars. You can also start to contemplate how NFTs become valuable digital assets, and how this is changing investing forever. And you can start to open your mind to what digital asset investing for wealth might look like in the future.
What makes Bored Ape Yacht Club worth so much money?
1. Multiple layers of programmed value
NFTs are not JPEGs. They are bits of code that can have multifaceted utility and therefore value, programmed in. Once we understood this, we understood the size of the tsunami that is coming. Hint, it’s not about the JPEG peeps!
The BAYC art is cool don’t get me wrong. But it’s the smart contract capability behind the BAYC NFTs (and how this is deployed) that make them pure genius as digital assets.
So much value has been programmed in to the various BAYC NFTs. Provenance, rarity, physical appeal, exclusivity, financial benefits, community belonging and a counter culture narrative – all things that people who buy them collectively value!
2. Originality and pioneering social design
Here are some of the programmed and non-prgrammed design traits that have helped make Bored Apes such a valuable digital asset:
There will only ever be 10,000 OG ape NFTs.
With owners like Jimmy Fallon and Kevin Hart, owning a Bored Ape NFT gives you membership to a coveted, exclusive community of either the crypto rich or crypto OGs.
Its’ a profile pic. Owning a bored ape becomes part of your online identity.
It’s a tribe with a strong belonging. It’s “See Ape. Follow Ape.” mantra offers OG Apes thousands of tribe followers for their Twitter, Instagram, TicTok and other online accounts.
It’s a right to ownership and potential future revenue stream. When you buy a Bored Ape you own the rights to it. The artist doesn’t. If you’re clever, this brings the prospect of future revenue through commercial licensing agreements. It’s already happening, with entrepreneurial Bored Ape #768 promoting weed brands in the US.
The utility of the NFT (and its value proposition) can evolve over time. Profile pics will turn into 3D images and metaverse skins. Imagine traversing the metaverse and being instantly recognisable and part of a tribe, all because of your provable Bored Ape identity.
The NFTs give you tiered access (with Bored Apes at the top) to online games, events and activities that are becoming a thing of crypto legend. NYC Apefest 2021 is a case in point.
There’s a shared collective future in the form of a project roadmap – members can see the potential unrealised value they’re buying into.
It’s now a counter-culture brand and fast becoming a tribal ecosystem that will likely evolve and adopt its own self sustaining tokenomics.
Observations for investors – the BAYC model and the future of NFTs
The BAYC model
Our first observation is that BAYC pioneered what has become the business model for many other NFT projects that have followed. It’s the model you’ll see time and again if you start diving down the NFT rabbit hole today –
Some cool art (subjective) + a Twitter Account + a home website + a community discord.
A roadmap that speaks of charity donation or social cause, live events and freebies for members.
Sometimes a promise of gaming utility and metaverse application sometime in the future (wen?)
And here is where it gets interesting to stand back and survey the landscape around the BAYC model, as digital asset investors. Because there are implications for the future of NFTs and your digital asset investing.
The future of NFTs
After looking closely at BAYC and other top projects, here are two observations about the future of NFTs:
Will there ever be another BAYC?
Firstly, while hundreds of NFT projects have tried to recreate the magic of BAYC using their model, few have been anywhere near as successful. Maybe the novelty of BAYC was pivotal to its success? Perhaps only the ‘OGs’ can ever have their folklore status priced in? Or maybe just a handful of founders have been able to bundle value in such an appealing package? Perhaps its the unique rights agreement allowing revenue in perpetuity?
If you asked 100 crypto insiders, they’d each have a different answer. This makes it incredibly difficult to get a handle on the market and its direction. It truly feels like this thing is running in hundred different directions at once.
We’ve never met an asset like an NFT
Secondly, BAYC does not equal the total utility and value that NFTs can bring. It’s just one creative and to date successful way of building a digital asset that people want to buy into. NFTs are software files with expanding programming capability and multiple applications – some demonstrated here and others that haven’t even been dreamt up yet! BAYC is just the start. The tip of the iceberg. The demonstration project.
The future of NFTs will almost certainly see them deployed in currently unimaginable ways, to capture new value.
Lessons for digital asset investors
So what does this mean for your investing?
Firstly, let’s recognise how much the investing landscape has changed. NFTs are incredible vehicles to store and transfer value across space and time. And isn’t that what an asset is? The technology, and its utility, is not going anywhere. This leads to the second point…
Secondly, it’s time to open your mind. It’s time to understand how technology is transforming the way humans monetise and store different types of value. It’s time to get on the right side of that. NFTs are bigger than a tribe of crypto apes with their JPEGs. They’re vehicles to execute original ideas and create and package social and economic value, with the help of smart contracts. This why we’re watching the space with interest.
Thirdly, what is valuable in one project may not be in another. NFTs are nascent assets. So it’s almost impossible to understand with certainty where the market might price a collection of them. There is no formula to valuation. The upshot is, this is a highly speculative and risky investing space! You can lose everything you put in. Or you could make $3.5M! Don’t get balls deep with money you can’t afford to lose!
Lastly, analysing the BAYC story gives us insights into what to look for as digital asset investors. A good place to start is with the project team, the brand and the vision. Which NFT projects out there are layering value in innovative ways? What projects are original and different from the herd? What other novel applications of NFTs can you imagine? The next BAYC in our view will look nothing like the first.
Bored Ape Yacht Club is a fascinating insight into how technology disruption is coming, like a veritable tsunami, to upend our online lives. Whether you ride the wave or are swept away in the wash, is up to you financial freedom seekers.
By the way, if you liked this article please share the love 🙂
There’s something innately cool about women who DIY. It might be the self reliance and self confidence that a woman with a hand tool exudes. We DIY upcycle furniture to save money and sometimes to make money.
What has this got to do with financial freedom, you ask? A big part of financial freedom is really thinking about where to spend your money and where not to. Upcycling furniture is a great way to revamp your home decor without spending big bucks. And then there’s the satisfaction you feel in your bones at taking something at the end of its ‘shelf life’ and make it new and beautiful again. You can even make it a side hustle. All it takes is just a few DIY skills and you can get some truly beautiful results with simple changes.
So let’s take a look at how to start upcycling furniture from scratch. We’ll also share 4 recent upcycle projects from the last 3 months, and how much money we saved!
What is upcycling?
Upcycling is the act of taking an object or material that is no longer wanted or needed and turning it into something new and useful. It’s a more environmentally friendly alternative to recycling, because upcycled products require less energy to produce than recycled products.
Furniture upcycling is the process of taking an old, outdated piece of furniture and breathing new life into it. Sometimes all that’s needed to revive an old piece of furniture is a little bit of TLC. Other times, a piece may be so badly damaged that it needs to be completely rebuilt from scratch. The good news is that there are loads of creative upcycling techniques to suit different DIY skill levels. You don’t need any particular skills to start!
7 reasons upcycling furniture is good for you and your wallet
If you haven’t upcylced anything before, here are 7 reasons to give it a shot:
You get a custom outcome – you can transform an old outdated piece into something that is tailored to your home and decor. Check out our recent custom dining table transformation!
You save loads of money on buying retail and buying new.
You’re taking trash out of the system, which can only be a good thing for the environment
You can do it as a side hustle! Seriously, sourcing free or cheap furniture, upcycling it and selling it on can be a great side hustle. It’s called ‘furniture flipping’. We have flipped the odd piece of furniture and know of folks who make good money from it.
You get to learn new skills for free – just search what you need on Youtube.
It’s creatively very satisfying. I love looking around my house and seeing the furniture we have upcycled and thinking “I did that and girl, it looks goooood’!
It’s empowering! Once you can handle a drill, sander, and paint brush you’ll be amazed at the little home improvement projects you’ll feel confident taking on.
What do you need to start upcycling?
Some folks, especially women, are afraid to try DIY projects like upcycling furniture. They’re worried about not knowing what to do or about stuffing it up. But we think they are the perfect little starter project to get your feet wet with home improvement DIY!
Youtube! This is an unlikely second, but outside of my dad Youtube has taught us just about all we know about DIY home improvement. You can find how to guides on just about everything, from how to use a belt sander to the best paint stripping techniques for stained timber… Get on it!
Universal screwdriver or drill – to remove fittings and hinges
A drop cloth to protect your floors
Paint stripper and paint scraper – especially if you want to remove stain from the timber
Sanding tools – a belt sander for heavy jobs or an orbital sander for light ones
Fine sand paper – to smooth the sanded timber to the touch
New fittings or revived old ones
Paint or stain – to refinish the furniture
Sealer or varnish – to protect the paint finish and surface from knocks or bangs
Where to find furniture and what to look for
The best place to look for furniture to upcycle are your own home or garage (yes it’s true!), curbside collection, Facebook Marketplace, Craigslist (in the US) or GumTree (in Oz). From our experience there are three types of items that both upcycle and on-sell really well:
Solid natural timber pieces.
If you can buy a side table, coffee table or chest of draws for the beautiful timber and strip it back to it’s natural grain these go on to sell well. Stripping paint or varnish from timber can be time consuming. But you don’t have to strip the whole piece! Check out our dining table transformation below to see what we mean.
Classic Ikea pieces.
Ikea is huge for a reason. The brand has some classic furniture lines that are affordable and that people really love. The Hemnes range is one. If you can find anything in this line in good condition, they on-sell quickly on Facebook market place in our experience. Classic Ikea lines like this one and good enough quality to upcycle and look really great.
in 2014 we bought a deceased estate investment property with some beautiful retro walnut timber lounge chairs and a sofa, in mint condition. I regret every day that we didn’t buy them as part of the sale. It was the kind of retro furniture you see selling for thousands a piece in designer furniture stores. Retro timber furniture at a reasonable price is extremely sought after. By simply re-upholstering the cushions we could have made decent money upcycling that set. The same goes for anything retro that is upholstered with a skirt. Remove the skirt, maybe add some legs and bob’s your uncle.
4 easy techniques to upcycle furniture (for beginners)
These are simple techniques that you can master without extensive DIY experience, and use to build confidence for more complex upcycle projects.
1. Remove components – fixtures, upholstery or panels.
Often less is more when it comes to modernising something. Removing strategically from a piece of furniture can truly transform it from piece that belongs in your nanna’s house to a contemporary statement piece. We say ‘strategically’ because you don’t want to remove anything structural – bracing or framing for example. It’s more about removing ornate decorative panels, fixtures such as handles, decorative metal, fabric skirting and sometimes legs. You can also remove glass panes or mirrors to contemporize furniture. Look for outdated decorative detail that is screwed, nailed or ‘puttied’ on. This way you can take it off without damaging the furniture itself.
2. Simple repairs.
We once made a quick $60 buying an Ikea tallboy on Facebook and then flipping it within the same afternoon. The original owner didn’t want the tallboy anymore because the backing panel had come loose and popped out. We simply unscrewed the side panel, slid the backing into place again and tightened all the screws. Voila! Perfectly good classic Ikea tallboy ready to on-sell. Solid or classic furniture with loose screws,, nails, hinges, and handles can be revived with simple repairs.
3. Clean, polish and replace hardware
This one’s easy because all you need is:
cleaning agents (which you’d probably have at home),
timber polish or wax
a screwdriver or drill
fittings, which you would either buy new or you could upcycle the original ones with etcher and spray paint.
You’re looking for classic pieces of furniture in great condition that you can clean, maybe polish the timber and either remove, improve or replace the old outdated hardware. It’s best to find these types of items free (like sitting on a curbside) if you want to upsell as their is less room for arbitrage. You could also look to arbitrage different marketplaces. Garage or estate sales, Craigslist (in the US) or Gumtree (in Oz) can be great to source super cheap items that folks just want to get rid of. Facebook marketplace is a good platform to upsell these once you’ve upcycled.
Back in the late 1990s I lived and worked in Japan for a couple of years, in a town called Kobe. We were dead poor when we arrived to our empty company lodgings. We ended up furnishing our whole house out of curbside finds . We’d go on ‘gomi’ hunts at midnight once a month when the neighbours put out their unwanted bulky items. We’d clamber up giant piles of furniture and return home with the most incredible stuff! Everything free, everything in working condition and perfect for this type of upcycling.
4. Stripping, sanding and repainting or staining
Up the skill curve slightly (but still at beginner level) comes repainting or re-staining techniques. Repainting or staining furniture is not just a matter of slapping on new coat of paint. A lot furniture is finished with protective varnishes or shellac paints. Some furniture looks like timber but it’s actually timber veneer. If you paint straight over these sufraces with normal paint, chances are the new paint won’t stick and your freshly upcycled piece will be chipped and peeling in no time!
Paint and stain is as much about preparation as it is application. 🙂
There is additional equipment for this method. You might need paint stripping agents, a paint scraper, sand paper, power sander, paint brush, primer, paint, clear varnish and so on. You also need to know a little about working with wood – how to follow the grain and what grit sand paper to use and when.
Once you’ve mastered these techniques you should feel confident to step the upcyling up a level. More complex techniques involve patching, or some basic joinery to add panels, rattan, decoupage, unholstery and so on.
Our projects (and how much we saved)
Many of you will know we moved to Tasmania and bought a new house in August 2021. Like any DIY enthusiasts, we’ve been steadily working through a ‘to do’ list of improvements to make the house our own. Here are 4 upcycle projects we’ve done in the last 3 months around our new home!
These 4 projects cost us a total of $240 and took around 11 hours to complete. We estimate we saved around $2300 on buying the same items retail. HUZZAH!
Custom oak dining table.
We have a solid Tasmanian oak dining table in a classic french provincial style that is about 20 years old. The table had been stained various colours over its life. After we moved house, the dark walnut stain didn’t suit the light Tassie oak aesthetic of our new kitchen. Because I knew the table was Tassie oak underneath, I decided to take the tabletop back to its original raw and natural finish.
The table top now ties in beautifully with our Tassie oak flooring and trims, and the legs are painted to match the colour of surrounding cabinetry and window treatments. We LOVE the result!
Cost: $30 for paint stripper, $149 for new Ryobi battery, $15 for sanding belts.
Time: 8 hours
Retail price purchased new: $1700
Cute fire wood storage.
For this project we found an old plywood box with rope handles on a neighbouring farm. The box was chipped and falling apart, but we thought it would make the perfect storage for our kindling. We re-screwed the box together, used wood putty to repair the chips, and then gave the whole thing a sand down on the outside. Then it was just a matter of applying some primer, three coats of paint and some stencilled letters. The best thing? This was all done with materials and tools we had on hand!
Total cost: Free!
Time: 2 hours.
Etsy for price firewood storage: $115
Standing desk with a view.
This standing desk for two is upcycled from the solid timber barn door we had in the kitchen and no longer needed. We bought some raw timber and 4 hinges and made two trestle frames to hold up the barn door table top. It’s large enough for the two of us to work without rubbing elbows and then there are those dreamy views of rolling hills and the mountain..
Cost: $45 for the timber and hinges
Time: 3 hours
Retail price for timber trestle desk: $500
the Cow Bar.
One of the best parts of our new home is the outdoor area. It overlooks our little creek and gives stunning views of rolling hills speckled with Friesian cows. Not to mention our Mt Roland on the horizon. We recently christened our outdoor space “The Cow Bar” with this honorary sign. It all started with a piece of timber salvaged for free from the local waste transfer station. After a simple sand and paint, we stencilled the letters on and then attached some rope to hang!
“It was the best of times, it was the worst of times.” Dickens may as well have been writing about Airbnb hosting in a pandemic when he penned this classic line. The truth is, Airbnb hosting is fundamentally different now. Travel is different. Covid has changed what people want and need when they’re away from home. If you’re wondering how to start an Airbnb today, it’s important to pay attention to these differences. To ignore them is to risk failing early and failing hard. In this post we’re going to cover some of those key differences, and share our 6 best tips on how to start and Airbnb in a pandemic (and still make money).
How to start an Airbnb in 7 steps
The steps that you need to take to start an Airbnb in normal times are no secret. You can find them on other sites. But what about in a pandemic?
In our experience, Airbnb success is not in the ‘what’ you do. Instead, it’s in the ‘how’ you do it. Especially in uncertain markets. The truth more than ever is, how you execute each of these steps below will ultimately determine whether you make money or lose it. You just can’t start an Airbnb today as though everything is normal and expect to succeed.
But we’ll get into that more as we go. Firstly, let’s start with the ‘what’ to do to start an Airbnb:
Find a property to list. This is all about market research and due diligence. There are 4 paths to take.
a) you already own property and want to list it on Airbnb.
b) you want to invest in a property specifically to list on Airbnb.
d) you manage an Airbnb for someone else (as a cohost).
Set the property up for Airbnb guests. This is all about the furniture, linen, utilities, appliances, utensils and everything else you need to host short term guest. It’s also about the condition of your property and how you turn it into a space that guests actually want to book and stay in.
List the property on Airbnb. Once you have set up the property you have to list the property on the Airbnb platform. It’s a simple but extensive process and a good test of whether your place is actually ready for guests. Not all listings are equal. You need to target your guest and make sure you satisfy all of the Airbnb algorithm requirements to the top list of Airbnb searches for your area.
Set up guest communications, nightly pricing, your booking calendar, and House Rules. These take time, research and thought. There are loads tricks to making sure you’re not picked off in peak pricing seasons, that you’re providing great guest experiences, and that you’re optimising booking opportunities.
Organise cleaning, laundry, maintenance and restocking of supplies between stays. Can you run a 4 hour turnover between guests? Either you’ll operate the listing yourself or you’ll set up a team of people around you to help you. Some folks chose the hybrid option.
Review guests. Reviewing guests will encourage them to review you back. Reviews are essential to get bookings from other guests. Lots of good reviews will also improve your ranking on the Airbnb platform.
Monitor and manage. Rinse and repeat numbers 4 – 6. Monitor pricing, calendar settings and guest communications. Operate the Airbnb. Review guests.
This is all pretty high level but it gives you an idea of what you’re in for, if you’re thinking about starting an Airbnb. If you’re comfortable with the idea of these tasks, maybe hosting is for you!
In our experience – especially over the last 2 years – some steps here are more critical to your success than others. If you don’t get Step 1 right the remaining steps can become irrelevant. The rest of this post will focus on why that is and how to find the right type of Airbnb listing when you’re just starting out, so that you will make money. Even in the midst of a pandemic.
Let’s dive in!
The pandemic impacts on Airbnb – a tale of two market trends
The pandemic drove people apart. Physically I mean. Contagion thrives in dense populations. We all had to stay apart to stay well!1.5 meters distance in public spaces. Self isolation requirements and quarantine.
Contagion also drove us into lock down. Our travel was restricted. And when we could move around, snap lockdowns always had us wondering when we might be stuck somewhere and for how long.
These two recurring themes of the last 2 years fundamentally changed the Airbnb market almost over night. Global lock downs caused booking cancellations across the board. 90% of bookings were lost and it was bloodbath out there from April to June 2020. But what happened as the pandemic prolonged and people could move about, with restrictions in place? Let’s look at the US data…
1. Falling urban demand
Once of the major pandemic impacts was on urban centres. AirDNA data tells us that demand for Airbnbs in large cities fell off a cliff in 2020 (down 43% in the US). Not surprisingly, once initial lockdowns lifted people chose to stay clear of dense urban centres where all the ‘people’ were, for fear of getting Covid.
It’s not reflected in the data, but in our view it wasn’t just the population density that killed bookings in these locations. It was also the type of listings most typical in these areas: high-rise apartments. Shared ventilation, cooling systems, common areas, and elevators all became very unappealing to those who did need to travel.
2. Small city / rural renaissance
Small cities and rural locations are where people chose to travel to instead. To get away from population centres and harsh restrictions. Demand for travel to certain holiday destinations also picked up. Destinations with low populations, large and spread out properties with plenty of space to move about were exceedingly popular. Here’s the AirDNA data to back this up:
What about other countries?
Trends comparable with these were found across the UK and Europe in countries with similar paths through the pandemic.
Australia, because of the way it handled Covid during 2020 and 2021, didn’t see as strong a drop in urban demand for Airbnb stays. Cities like Brisbane and Adelaide were able to remain open, for the most part, at least to travellers from within their own state. But as in other countries, destination locations, smaller towns and regional locations were undoubtedly the winners in terms of demand for stays in 2020 and 2021. Once again, it’s all in knowing the numbers. With 71% of Australians living in ‘major cities‘, there’s just a bigger pool of travellers heading to the regions for holidays or time away.
What’s in store for 2022?
No-one has a crystal ball, but in an attempt to help you start your Airbnb income we’ve done some research, reviewed the data, and had a crack at some predictions for 2022.
What history tells us about how a Pandemic ends
According to this2020Washington Post article, the last pandemic – the Spanish Flu of 1918 – ended slowly. The virus – H1N1 – is still with us today. But people developed an immunity to it over time, and it became less lethal as the pandemic carried on in waves.
The key ingredient here, if you’re wondering how to start an Airbnb, is time.
If history is any guide, we think life will be uncertain for a while yet. Maybe we’ll continue as in previous pandemics to have waves of different Covid variants wreaking havoc until illness subsides over time.
So if you’re starting an Airbnb, expect people to make decisions accordingly. This includes decisions about if, when and where to travel and what type of accommodation to stay in. Think about how to start an Airbnb where bookings are insulated as much as possible from pandemic impacts. Understand the trends looking forward, so you can mitigate your risks and take advantage of new opportunities. Here are our 2022 predictions, based on AirDNA data and analysis.
Pent up demand for travel will play out (in waves)
We’ve all been wearing masks and staying home for 2 years now and WE’RE EXHAUSTED!!! It totally makes sense that people want to get out and about again.
According to Destination Analysts, “Nearly 80% of American travellers have trips currently planned in 2022.”
But we are also still worried about catching Covid. This survey data from Destination Analysts shows that 40% of Americans with intent to travel have cancelled or postponed a trip due to the latest Omicron wave.
So people will continue to want to travel. And the good news is that many Airbnbs are better positioned than hotels and resorts to take advantage of pent up travel demand. This is due to the type of accommodation typical of Airbnbs and in many cases, their dispersed location. Huzzah!
While we think guests will book more trips and they’re more likely to look to Airbnbs than to hotels and resorts, they’ll also cancel quickly if Covid safe travel is at risk. We know our cancellation rates are up since the pandemic due to traveller uncertainty.
The Airbnb ‘go rural’ trend will not end
Urban Airbnb demand in the US only recovered 8% in 2021 according to AirDNA, possibly due to the waves of new Covid variants like Delta and now Omicron upending travel plans. But that number means bookings are still down over 30% on 2019 levels. And that is enough to turn most Airbnb properties from a profit making venture to a loss making one. By our estimation, you’d need to have been booked at over 80% average occupancy in 2019 to sustain a 30% drop in bookings and still turn a slim profit. The average Airbnb occupancy rate in 2019 was closer to 50%. Supply of Airbnb listings in urban locations has dropped as a result.
Expect this theme to continue until people feel safe travelling to highly populated areas once again. AirDNA predict that demand for urban Airbnbs will not return until 2023.
We also think that if the pandemic goes on in waves, the Airbnb ‘go rural” trend will not end. Not just yet anyway. Be aware though that new supply has already moved into this market so you will find more competition for ongoing booking demand. If running a rural Airbnb listing appeals to you, leave room in your due diligence for bookings to drop off when the pandemic does end. Look at 2019 occupancy rates and nightly pricing on AirDNA to understand what your bookings might look like if ‘things return to normal”.
A new class of Airbnb guest has emerged: flexible workers
With waves like Delta and now Omicron, we’re predicting that flexible work arrangements will not phase out anytime soon. Employers just can’t have their staff all in one place and at risk of all getting ill. Diversifying staff accommodation is now a risk mitigation strategy. So there will continue to be a cohort of employed people who can live anywhere and still work remotely. We think that a portion of these folks will chose to move out of heavily restricted population dense areas, at least temporarily. They’ll situate instead in smaller cities, rural areas, or even in countries less impacted by Covid. And because they need temporary lodgings, flexible workers might just book your Airbnb to stay in.
AirDNA data shows an increase in the number of longer term stays (28 days +) to 15% of total bookings, which they attribute to flexible workers.
6 tips on how to start an Airbnb in a pandemic
Before 2020 there was no ‘right’ type of Airbnb property to list. If you put up a great looking property on Airbnb with good amenities you could make money just about anywhere. But Airbnb data during 2020 and 2021 shows that listing type now matters A LOT. Picking the right location and type of property is critical if you want to start an Airbnb in 2022.
Breaking down the trends, reading the data, and learning from our own Airbnb host experiences over the last 2 years here are our top 6 tips on how to start an Airbnb in a pandemic and still make money.
Stay away from large city listings. We can’t see these coming back during 2022.
Look at destination locations and rural areas. Just plan for booking demand to dampen at some point in the future. Factor this into your numbers!
Small and mid-tier cities are a pretty safe bet during and post pandemic. We suggest looking for:
Mid tier cities people travel to for multiple reasons.
Gateway cities to regional areas as rural dwellers need access to major services.
Satellite cities with tourist attractions as lots of people can travel there by car.
The type of property you list is now more important. Data shows that larger homes are more in demand as families fear snap lock downs in small spaces. Unique stays in less populated areas are rocking it. Stay away from small apartments in buildings with more than 2 stories.
Make sure you can accommodate longer stays (28 days plus). Amenities such as wifi, cooking facilities, clothes storage, a washer and dryer, a place to work and an outdoor space are all really important to longer term guests. Proximity to services like medical care and supermarkets are also critical.
Pandemic proof your listing. Make sure you have a property with a separate walk up entrance (no lifts), no shared utilities, no common areas, self check-in, and private outdoor spaces.
The final word
The good news is that AirDNA data shows you can start an Airbnb in a pandemic and still make good money. Booking demand has increased for certain listings in certain locations with certain amenities, and so have nightly prices. But the data also shows that not all Airbnbs are equal during a pandemic. Where and what to list are now critical questions you need to answer before you start acquiring or setting up your first / next property.
If you want to learn more about how to start an Airbnb, bookmark our Airbnb Host Hub page where you’ll find out upcoming eBook on exactly this topic!
If you’re serious about starting an Airbnb you really need to understand the data and trends before you leap. We recommend using AirDNA. Their low-cost monthly subscriptions that you can turn off any time are golden.
You don’t need a lot of start up capital or to be a real estate mogul to make money on Airbnb. Hell, you don’t even need to own any property. You just need to know the shit outta how to find and run a great rental arbitrage opportunity. So let’s dive in and get started! Rental arbitrage has become an increasingly popular strategy for making extra money in real estate, and many people are interested in learning how to do it themselves. In this blog post we will cover:
what rental arbitrage is,
how rental arbitrage works on Airbnb,
what to look for in a rental arbitrage property,
6 traps to avoid when rental arbitraging, and
our own personal rental arbitrage case study!
What is ‘arbitrage’?
In its simplest form, arbitrage is the process of buying a product in one market and then immediately selling it in another market for a higher price. This can be done by taking advantage of price differences between two different markets, or by taking advantage of discrepancies in the price of similar products offered by different sellers.
There are tonne of arbitrage opportunities available nowadays with the internet giving everyone access to different marketplaces instantaneously.
One well known arbitrage strategy is ‘rental arbitrage’.
What is rental arbitrage?
Rental arbitrage is about taking advantage of price differences in different property rental markets. There are different ways to do this. For example, you might buy a rental property in disrepair for a price based on the current rental return. You can arbitrage the rent by fixing the property up cheaply and increasing the rent. In this case you are arbitraging rental sub-markets between run down and well-presented rentals. The difference could literally be a lick of paint, some gardening and new curtains!
Another rental arbitrage technique – and the one we’re going to focus on here – is the practice renting a property long-term and then re-renting it on short term accommodation sites like Airbnb or Vrbo.
This kind of rental arbitrage is also known as ‘house hacking’ and there are two main ways to go about it.
You can rent a property, live in it and rent out a room in that property short term.
you can rent a property long term solely to rent it out to others on a short term basis. You don’t live in it at all.
We’ve made money with the second strategy, but this post applies to both methods.
The rental arbitrage model
The model for rental arbitrage using Airbnb is simple – your Airbnb earnings need to more than cover your cost to rent the property from the owner, plus your operating expenses as a short term rental. If you’re able to find a property where the Airbnb income will be more than your costs, you have created an opportunity for rental arbitrage!
Making money from rental arbitrage is highly location and market dependent as you can see from the AirDNA graph below. AirDNA is a great source of real data from Airbnb rentals.
This image shows the short term rental premium for different US markets based on real Airbnb and long term rental data.
The graph shows that long term rental rates have increased in some US markets and decreased in others due to changes in demand. Short term rental nightly rates and occupancy rates have also changed with demand. But what does all this mean? Well, markets where growth in short term rental demand and nightly pricing exceeds long term rental rates are golden!
In this post we are going to demonstrate that rental arbitrage can be satisfyingly profitable if done correctly, but there are also risks involved. You need to know your numbers and market trends (like those illustrated above) to make money. But don’t worry, this data is available on the internet! We use AirDNA for all of our Airbnb analysis.
Make sure you keep on reading right to the end where we share our own personal case study showing how we made money with rental arbitrage.
6 rental arbitrage traps to avoid
Once you understand the basics of rental arbitrage, it’s important to be aware of some traps that can derail your profits. Here are five to watch out for:Your own time commitment – managing a short term rental takes time, so make sure you factor this into your calculations
Not properly researching an area – if the short term rental market is weak or there are too many short term rentals in the area, your earnings will be lower than expected. You need to be clear what your Airbnb occupancy rate will be and the nightly rate you can charge.
Underestimating operating costs – from cleaning supplies to wifi service, make sure you have a realistic estimate of all your expenses. You can take a look at our case study below to get a better idea of what these might be.
Ignoring the rules – governments and municipalities can make and change rules related to short term rentals, so always stay up-to-date on any new rules that could impact your bottom line. It’s best to find a location where there are already clear rules about running Airbnbs.
Finding properties with hostile building management – some building managers or body corporates will do everything in their power to keep Airbnb businesses out of the building. Airbnbs can undercut their profits. Find Airbnb friendly buildings in rent in!
Not managing risk – from damages to rental theft, there are a number of things that can go wrong with Airbnb properties or guests. Make sure you have enough in your budget to cover any unexpected costs and get short term rental insurance!
Make sure you have a clear written agreement with the property owner stating your intention to rent the place short term. Be crystal clear about who will pay what costs – utilities, maintenance, and repairs.
What to look for in a rental arbitrage property
There are several things we recommend that you look for when identifying rental arbitrage opportunities:
The numbers of course! There must be a good short term rental premium in that location. We talk about ‘short term rental premium’ above.
The property should be in a desirable location with high demand from Airbnb guests. You can check short term rental demand for an area using AirDNA.
The rental rate that you pay should be below or at market value.
The property should be well-maintained and (ideally) furnished. This will reduce your Airbnb set up costs to things like small appliances, kitchenware, and consumable items (bath products). Lower costs mean quicker profits!
Properties that offer extra value that isn’t reflected in the rent. Like plenty of room to sleep more people using sofa beds or ways to turn dead spaces into a profit. Examples might be transforming a study into an extra bedroom, or an ‘insta-worthy’ view that’s not reflected in the rent.
A property that can out compete other Airbnb listings in the area. This means that the amenities, the interior design, the space, the light and the comfort level are better than the average local listing.
When considering a rental arbitrage opportunity, always do your research to make sure these factors are present!
Now you understand what rental arbitrage is, how it works, some of the traps to avoid, and what to look for. Huzzah! Now let’s take a look at an example of how we successfully made money with this strategy.
Our rental arbitrage case study
We’re going to share with you a personal case study using rental arbitrage. Hopefully it helps you understand how to go about finding these opportunities and how much you can actually make, if you do it well!
When looking for an investment opportunity, we always start with a due diligence phase. For Airbnb, we use AirDNA to do our research, as well as the Airbnb platform itself. Our aim was to find a rental arbitrage opportunity and set up a new Airbnb income stream for our financial freedom goals!
Our due diligence on AirDNA discovered:
strong demand for Airbnbs in a particular Brisbane CBD area; an entertainment district featuring restaurants, bars, clubs, and cultural venues
a limited supply of quality 1 bedroom apartments in the direct vicinity
a pricing gap in the nightly rate for singles or couples wanting to stay in the area
the most successful Airbnb listings in the area had a ‘wow factor’ to them.
Once we identified this gap in the market we went about finding an apartment to rent to specifically fill that gap in market demand and pricing…
We found a one bedroom apartment for rent in the area through a real estate agent in our network. These are the features that we felt made the property a potentially good Airbnb option:
spectacular city views
walking distance to entertainment venues, restaurants, pubs and clubs
spacious apartment for a 1 bedroom
all new interior
Airbnb friendly apartment building.
The rental arbitrage deal
After further discussion with the agent, the apartment was offered to rent for $460 per week.
Next it was time to do the numbers….
After crunching some high and low scenarios we realised from the combination of Airbnb demand (occupancy) and achievable nightly price, compared with the weekly long term rent and likely expenses that this particular would be a good rental arbitrage opportunity.
We signed the lease, snapped into action and began to set up the Airbnb listing.
Set up costs
The apartment did not come furnished, which meant that we had higher start up costs. We would also face a pay back period before we started making actual profit. We needed to limit the set up costs to achieve a payback period of under 6 months if possible, given we had a 12 month rental lease.
It cost us $7000 AUD to furnish, decorate and equip the apartment for Airbnb guests. This included all new items and buying our own linen. It did not include the 7 days it took to set everything up, which you’re paying rent for. Make sure you factor this in to your analysis.
Income and expenses
Here is our actual income and expenses ledger for the month of January.
Cost per month**
Cleaning and laundry
Total income (net of fees)
** numbers are rounded
Extrapolating from these monthly figures we can get an indication of annual profits.
Year 1 profit is equal to the net income after start up costs….
= $1600 x 12 months – $7000
Year 2 profit is more like $19,200.
Thats just from one x 1 bed apartment! You get three of these things that work well and you could consider quitting your job and building an empire!
It’s worth knowing that not all months are equal in Airbnb income – some have higher demand and some have lower demand. CBD locations like this one are not particularly seasonal however, and can experience strong demand all year round due to the variety of entertainment options in the area. What you really need to watch out for is oversupply of properties locally – this can really impact your occupancy rates and your bottom line. We have ways to manage this risk which you can read about in our upcoming ebook!
Our eBook will also share the due diligence strategies we use to help our Airbnb business ride through business risks like unexpected dips in demand (from a pandemic maybe!).
If you’re doing due diligence on a potential property of your own, AirDNA will show you average occupancy for a particular area as well as average nightly price for different types of properties. Base your due diligence off of this data but allow a buffer for expenses. We also recommend running some sensitivities on your analysis based on higher and lower demand scenarios!
In this post we’ve shared some beginners knowledge about rental arbitrage and how we make real honest to god money from it.
If you want to learn more and set up an Airbnb income for yourself, here are two things you can do:
Sign up for the BNBformula training and get cracking on building your own Airbnb business empire, OR
Bookmark our Host Hub page and stay tuned for our upcoming eBook. It’ll cover all of our hacks and tips with this rental arbitrage strategy.
Or you can read our other cool posts on making money with Airbnb!
If you’re baffled by the exponential growth of certain cryptocurrencies and wondering how you might get in on the action, then this post is for you. The truth is, you won’t find the best cryptocurrency investments using conventional company and stock valuation methods. Crypto is different. You need to take a different approach to find those projects that will reward you with potential exponential growth over the longer term.
One approach to identify potential top gainers in crypto is to pinpoint those projects with strong ‘network effects’ that drive value to users and push token prices to seemingly parabolic levels. But what are ‘network effects’, where do you find them in crypto, and how do you invest? Let’s take a look…
What are network effects?
Network effects put simply are when a product, service or platform increases in value the more people use it.
Direct network effects happen in a reinforcing loop as users join a network and in doing so bring more value to existing and future users. The value of the product grows as more users join, and more users join because of this growing value. Hence the reinforcing loop. Think a telecommunications network, or a transport network.
Users also decide to participate in a network based on the level of benefits or value from ‘add on’ or complementary products or services. This describes the indirect network effects that can come into play in platform businesses that attract complementary products and services that add on to the platform and grow it indirectly. Like with Facebook. You don’t just use it to see your friends posting. There’s messenger, marketplace, advertising, FB groups and so on…
Most importantly, for investors looking for growth assets there is a point – a reaching of critical mass – when user adoption (on multiple sides) goes exponential due to the reinforcing value loops of direct and indirect network effects.
Why network effects can lead to exponential growth
1. It’s numbers game
The number of possible connections in a network like Airbnb equals the number of users on one side (the hosts) multiplied by the number of users on the other side (the guests). Its the same for all two sided networks that produce network effects.. Every user that joins the network makes it more valuable for the next user. If you have a network with 2,000 hosts and 10,000 guests, that equals a network of 20 million possible connections between users.
The number of connections in a network represents the growth of the network and its utility to other users, as well as its value.
2. Network effects are hard to displace
A network effect, once created, is hard to displace. Why doesn’t Facebook have any real competition? Its network effects have established its incumbency – by virtue of its sheer size, reach, reinforcing value loops and sometimes built-in infrastructure. This incumbency means Facebook as a competitor is very difficult to overcome.
Another important point for investors is that incumbents with network effects enjoy large, entrenched advantages due to their existing customer base. Why is that though? According to this Harvard Business Review paper on why some networks thrive over others, an Airbnb competitor would have to enter the market on an international scale—building its brand around the world to attract travellers and hosts.
To achieve that, the competitor can’t just be a little bit better, or even twice as good as Airbnb; it has to be a quantum leap better to convince a critical mass of guests and hosts to move to it.
This is why when platforms or businesses with network effects establish incumbency they’re very tough to disrupt.
So what does this mean for your crypto investments?
Firstly, projects that enjoy network effects (with incumbency) may be around for a longer time because they are hard to disrupt.
Secondly, if you are an early investor, the gains can be exponential due to the effect itself.
Lastly, because of their levels of growth and incumbency, the stock can continue to outperform over the longer term.
Identifying network effects in crypto
One strategy for investors might be find the crypto projects greatest network effects and (potential) incumbency.
The second one – incumbency – is important and hard to nail down. Crypto is new and very few projects have achieved sufficient size or growth to establish true and authoritative incumbency over the competition.
How to identify crypto projects with network effects?
So what factors might determine whether the a particular project has the potential for network effects? What metrics will tell you that a project is being actively used, rapidly built-out and adopted at a rate of knots? Lets take a look at 5 such indicators:
Network users & nodes – the first sign network effects may be at play is the number of project users or nodes growing quickly. Nodes are found on blockchains. Their main purpose is to verify each batch of network transactions, or blocks. They’re necessary for the blockchain to both function and expand.
Unique addresses – the number of wallet or payment addresses for the platform token that have more than a zero balance. For example, the number of individual ETH wallet addresses. It can be used as a proxy for the number of network users. When the network is popular and people are using it, there are more unique addresses. But that’s not completely accurate as one user can have multiple addresses.
Total value locked – or ‘TVL’ shows how much is ‘locked up’ in decentralised finance products on the network (or in the Smart Contract platform). It’s an indicator of DeFi use on the platform.
Daily transaction volume – this is the number of transactions associated with the crypto each day. Transactions volume shows the level of user engagement with the product or platform. For network effects, the trend should be sharply upwards.
Developer activity – if new layers, applications and protocols being built on top of it or alongside and integrating with it this demonstrates indirect network effects that in turn bring more users and more developers. Developer activity indicates confidence in the ecosystem, roadmap and underlying technology.
The best cryptocurrency for exponential growth
So, if a network effects occur in platforms or networks where each user brings additional value and more users in a reinforcing loop, where in the crypto ecosystem might this occur?
The answer: Layer 1 blockchains.
What are Layer 1 blockchains?
‘Layer 1s’ are the blockchain ‘networks’ that form the ‘base layer’ of the crypto ecosystem. They are the networks on which everything else in crypto is built!
The digital asset ecosystem requires robust, secure and distributed blockchain networks to operate on and to ensure asset immutability. Layer 1s meet this need. They are the foundational tech of that digital asset ecosystem.
Blockchain-based digital assets, such as NFTs and stablecoins, are all built and issued on top of Layer 1 platforms.
Layer 1 cryptocurrencies
Tokens native to these Layer 1 networks (such as ETH to the Ethereum network) play a role in securing the networks. Holders that stake their native tokens to support the network operating are rewarded for doing so. Tokens are also used to pay transaction fees on the network (with fees going towards rewards). In some cases, tokens also give holders a say in network decision making.
Buying these tokens are how investors can gain exposure to the Layer 1 project.
Layer 1 projects have been a strong performing crypto category since the May 2021 market correction. With crypto still in the early adopter stage and just a few hundred million users world wide, some argue the exponential growth curve for successful layer 1 blockchains has not yet begun.
There are over 100 Layer 1 blockchains in the crypto ecosystem so next we sort the wheat from the chaff in Layer 1 blockchains that we invest in for their potential network effects. Let’s look at ‘The Leaders”, “The Contenders” and “The Challengers.
How do investors in Layer 1 crypto benefit from network effects?
When you own the native token of a Layer 1 blockchain, you own a share of the future value of transactions on that blockchain. As network effects grow demand for the blockchain and expand the on-chain economy, your share of future value grows too.
Layer 1 cryptocurrencies we hold
Bitcoin is the grandaddy of cryptocurrencies. Lyn Alden gives a great synopsis of the network effects of Bitcoin. We’re not going to go over the arguments here, but we invest in Bitcoin as a store of value, border-less medium of exchange, and an instantaneous and low cost worldwide payment system (think about the avoided remittance fees globally).
Bitcoin is also the OG incumbent. Its total market cap makes up anywhere between 40% and 60% of the total crypto market cap these days. Nothing else comes close in terms leading the crypto market or influencing crypto price trends.
Network effects – tick
Incumbency – tick.
For these reasons, we hold Bitcoin in our crypto portfolio. We think its network effects will continue to play out as more countries like El Salvador recognise the potential value to local economies and to raising their citizens out of poverty. We also see regulators in more countries (like Australia and eventually the US) normalising Bitcoin investment vehicles, which will help on-ramp more users into the network.
Ethereum is like a super computer base layer for smart contracts. Critically, Ethereum also has first mover advantage when it comes to Layer 1 projects in crypto, which has given it serious incumbency over the competition. Ethereum is the Top Layer 1 smart contract blockchain by market cap, with daylight second.
Fun facts for ETH investors:
Ethereum dominates the DeFi (decentralised finance) and NFT (non-fungible token) space. It has the most protocols and decentralised apps built upon it of any Layer 1 blockchain network.
TVL in the Ethereum network is $172 billion. The next largest Layer 1 by Total Value Locked sits at $20 billion. That’s daylight in between peeps.
The Ethereum ecosystem is gigantic. The biggest there is in crypto. Indirect network effects – tick.
Daily transaction volume on the ETH network has recently surpassed the Bitcoin network, which some suggest means that ETH will ‘flippen’ (overtake) BTC on the Layer 1 leaderboard sometime in the near future.
Other Layer 1 platforms are uniformly bridging into ETH. This cements Ethereum’s incumbency.
A recent protocol change introduced token burning so that ETH will become a deflationary asset (more tokens burned than new tokens issued). When supply tightens and demand grows, what happens to price?
Developer activity on platforms Github and Discord shows Ethereum development at almost double its nearest Layer 1 competitor.
ETH has executed and planned significant network upgrades (ETH 2.0), showing strong protocol consensus which is positive for its longevity.
ETH developer activity
Eth 2.0 upgrades
Despite the hype, Ethereum suffers from one flaw that threatens its incumbency. The cost of using its network. This cost has driven hoards of users over to much cheaper Layer 1 competitors, like Solana.
Ethereum is fighting back with network upgrades (ETH 2.0) that claim to combat the gas price issues. Along with these critical upgrades, ETH also maintains its Layer 1 dominance the more it works with add on Layer 2 projects like Polygon network to extend its ecosystem reach and offer cheaper network solutions.
ETH is is a core holding in our cryptocurrency portfolio. This is not financial advice peeps – we are just sharing what we are doing. DYOR always!
Now that we’ve taken a brief look at our personal leader board, lets move on and look at some other top contenders:
‘The contenders’ are fast growing Layer 1 blockchains in crypto in terms of market cap, ex-Bitcoin and Ethereum. The two Layer 1 projects below are have been growing at pace and starting to jockey for shot at blockchain supremacy, alongside BTC and ETH in terms of market cap.
Solana markets itself as the fastest and cheapest blockchain in the world. These two factors have catapulted its token SOL into the crypto stratosphere since January this year. Solana’s high speed and low cost features have solved the problems of the Ethereum blockchain for both crypto enthusiasts and software developers. As with all network effects, the SOL price has shot up this year as more and more users and developers are attracted to the blockchain.
Solana is building out a rich ecosystem including NFT marketplaces, DeFI protocols, as well as gaming, metaverse and Web 3 decentralised apps. Some of the most popular dApps built on Solana include Aurory and Star Atlas (gaming), Raydium and Serum (DeFi), and Solarnart and Audius (NFTs).
Fun facts for Solana investors:
Solana is highly scalable and can already process 700,000 transactions per second.
Solana developer activity comes in second to Ethereum on Discord and third behind Polkdot on Github.
TVL is over $13 billion which is third highest Layer 1 TVL and represents just over 5% of Total Value Locked across all blockchains.
Solana already has around 400 decentralised apps built on its blockchain despite only being launched in April 2020.
Solana has a thriving NFT marketplace that is growing in popularity due to the cheaper transactions costs of using the network compared to Ethereum.
The price of SOL is already up over 13,000% this year. That’s an exponential growth rate indicating network effects may already be in play.
The biggest criticism of Solana is its lack of decentralisation. In crypto, decentralisation is often seen as an indicator a project is a safe bet over the longer term. Decentralisation is gauged by the number of validators on a network. Layer 1 incumbent Ethereum is highly decentralised with over 200,000 validators globally. Solana has just 1200 validators, showing its more centralised structure.
It’s worth knowing that the Solana network recently suffered a DDoS attack when bots targeted the network with 400,000 transactions causing it to reach max throughput and taking the network down for 17 hours. While it was a set back, the attack was of insufficient threat to affect the growth of this Layer 1 protocol, or our investment in it..
Polkadot is different to the other Layer 1s featured in this post. It’s more than a Smart Contract Platform. Its aim is to ‘enable a completely decentralized web (3) where users are in control’. Here’s how Polkadot bills itself:
Polkadot is built to connect private and consortium chains, public and permissionless networks, oracles, and future technologies that are yet to be created. Polkadot facilitates an internet where independent blockchains can exchange information and transactions in a trustless way via the Polkadot relay chain.
In a sense, Polkadot is a Layer 0 network because it provides a framework for other Layer 1s to build on and connect to each other. Polkadot’s niche in blockchain technology is ‘interoperability’. Its aim is to build the trustless network layer that links Layer 1s together, making it seamless to move through the crypto ecosystem.
Because its vision is so large, Polkadot is probably the hardest of all of the Layer 1 networks to get your head around. It is also difficult to value using the metrics we talk about above. But the enormous vision, and the calibre of its tech founders, make Polkadot an incredibly interesting digital asset play.
Fun facts for Polkadot investors:
The founder of Polkadot is Ethereum Co-Founder and former Chief Technology Officer, Gavin Wood.
Polkadot has a $50 billion dollar market cap and is the 8th largest crypto by market value.
There are 142 project building inside the Polkadot ecosystem. The list includes DeFi, NFTs, DAOs, Layer 1s, Layer 2s, Metaverse projects, blockchain gaming, Oracles and so on.
Polkadot holders have locked over $1B in the first Polkadot ‘parachain’ auctions which will determine which bespoke blockchains get to use the Polkadot network. ‘Parachains’ are the name of the blockchains that get to built on Polkadot. The Polkadot network can support 100 of them. ACALA DeFi platform won the first Parachain auction for a slot on Polkadot.
Once it’s fully functional, Polkdot is expected to be able to handle 1,000,000 transactions per second. That’s faster than the fastest Layer 1 in today’s crypto ecosystem – Solana.
Polkadot’s token supply is inflationary, growing by 10% a year which is not great for the DOT price longer term.
Polkadot, by its very design, is the blockchain of all blockchains. However, DOT has not experienced the same level of ripping growth this year that competitor Layer 1s like Solana and Avax. We’re excited for Polkdot’s future and hold DOT in our crypto portfolio, but building this ‘blockchain of blockchains’ is going to take some pulling off.
“The Challengers are our up and coming Layer 1 blockchains. The smaller cap projects with small but growing ecosystems of platforms, tools and dApps building on top of them.
Avalanche is the new blockchain on the block this year and its concept is a lot like the Polkadot project. It bills itself as a network of blockchains with blazing fast speeds, better decentralisation (more validators) than Solana, and better scalability than Polkadot. If Avalanche becomes all of these things it could be one to add to your radar.
Fun facts for Avalanche investors:
Avalanche’s TVL has hit parabolic levels since August 2021, growing from a bit over $300M to $11B! 24% of that is locked in the AAVE lending protocol.
Avalanche’s market cap is up 85% in the last 30 days, hitting $23 billion. The price of AVAX reached all time highs this week is now in price discovery.
Avalanche has a fast growing ecosystem with loads of DeFi protocols and dApps, tonnes of exchanges and swaps, as well as a growing NFT dApp presence. Gaming is not as big on Avalanche as it is on Solana.
Avalanche recently announced $600 million in incentives to encourage development on its network. It aims to coax developers over from Ethereum.
AVAX token is used for network fees, capped at 720 million, and burned (on creation of blockchains, assets, subnets and payment of transaction fees). If the tokens burned exceed rewards (to validators) the tokenomics are deflationary. This is generally positive for the AVAX token price longer term.
Terra blockchain is all about creating programmable (private) money for the internet. It is a growing stablecoin payment system Layer 1 ecosystem. Terra is primarily a DeFi play, making it less versatile than other Layer 1s here like Solana and Polkadot. But it also has a clear niche and need. The Terra token used to pay network transaction fees is called LUNA. Terra’s most popular product by far is the Anchor lending protocol.
Fun facts for Terra investors:
Terra holders can stake their LUNA and earn rewards for supporting the Terra network.
Terra users can lend their UST (the USD pegged Terra stablecoin) on Anchor Protocol for a 20% APY with little exposure to price volatility. This one product has massively increased the popularity of Terra blockchain.
Terra has introduced a token burning mechanism, making it a deflationary asset.
TVL is just shy of $10 billion, with around 40% of that locked in Anchor protocol.
Terra issues stablecoins pegged to loads of different world fiat currencies – like the EURO or Korean Won. This makes it a cheap and fast global payment system. Terra stablecoins are currently widely used for retail and commerce in Korea and use in other countries is growing. Terra claims to have 2 million users of its stablecoins worldwide.
UST is an algorithmic stable coin. It uses an algo to maintain its peg to the USD. The algo could fail. The peg could fail. If it does, you’ll lose value in your stablecoin holdings. If the project fails, you might lose everything. So it is in crypto.
Whether it’s a multichain digital asset ecosystem future, or ‘one chain to rule them all’, we have a few Layer 1 blockchains in our digital asset portfolio.
By virtue of their role in the crypto ecosystem, Layer 1 blockchains could turn out to demonstrate network effects for exponential growth.
As we’ve already discussed, network effects + incumbency can form a potent mix for future price growth.
None of this is financial advice peeps – just sharing our opinion about what we are investing in. What is the best cryptocurrency for exponential growth? Well, do your own research and reach your own conclusion.
The holy grail of crypto investing is trying to work out which are the ‘shitcoins’ (coins that have no value or purpose) and which coins and tokens will be around and grow in value for years to come. The latter are digital assets we prefer to invest in. So in this post, we look at three NFT tokens for potential long term growth.
Warning: You’re going to have to open your mind as you read through this post if you are new to digital assets. Especially if you’re a boomer or at least not a millennial. The digital asset ecosystem is like a parallel universe built by aliens using mind bending technology. That’s exactly how we felt when we first fell into the crypto rabbit hole. There’s a learning curve to crypto investing that is both financial and technical. Get comfortable with it.
Also..this is not financial advice peeps! If you’re making crypto decisions based on an article on the internet, it’s time to take a long hard look at yourself. 🙂 DYOR stands for Do Your Own Research – we do recommend this! The coins and tokens that we cover here are ones that we’ve invested in. Let’s go over them so you can find out why we took the plunge.
Theta Network is a decentralized video streaming blockchain network that offers crypto rewards to users in exchange for their unused bandwidth. Theta uses this bandwidth to provide video streaming services to partner companies. The company is attempting to establish itself as the leading media and entertainment blockchain. Here are some runs already on the board:
Partners – Google, Samsung, MGM Grand, Katy Perry, Decentraland. Lionsgate, Cinedigm, World Poker Tour, One (MaiTai fighting league).
Investors – Sony Innovation Fund and CAA to name a few.
Media Advisors – Steve Chen Co-founder of Youtube and Justin Kan co-founder of Twitch.
Theta’s revenue streams include decentralised streaming and video delivery, as well as a new, complementary revenue stream of NFT digital collectibles. Let’s look at each of these.
Decentralised streaming and video delivery
Theta blockchain leverages underused devices in homes across the globe to distribute video more efficiently using the decentralised Theta Network. Products include Theta.tv, which is like a decentralised version of Youtube but with really great streaming quality. The biggest difference is that Theta doesn’t monopolise the value created by its creators (Youtube keeps 45% of ad revenue peeps!).
Users of Theta.tv can watch streamed video content and get rewarded at the same time for sharing their unused bandwidth to relay video. Rewards are in Theta Fuel (TFUEL) tokens. There is no special equipment required to contribute to the video streaming network – you just connect via a standard PC or Smart TV.
Theta’s decentralised streaming model results in lower cost streaming for its partners and more reliable quality of service for Theta.tv content creators and end users.
Creators on Theta.tv can monetise their content through subscription and donations. They also get 25% of all TFUEL earned by their viewers.
You can also earn TFUEL just by staking THETA and supporting their blockchain network.
Both THETA and TFUEL can be swapped into stablecoins like USDT. Stablecoins can then be exchanged into Fiat (dollars), so earning money on Theta.tv equals money IRL (in real life).
Theta Edgecast is a decentralized video streaming DApp product that is 100% built on Theta’s native blockchain. Theta Edgecast can capture video, transcode it in real-time, and cache and relay it to users globally all through Theta’s peer-to-peer edge network. That network comprises over 100,000 edge nodes today.
NFT digital collectibles
Theta expanded into the NFT arena this year with the launch of ThetaDrop NFTs. It intends on incorporating exclusive NFT drops as part of the live user experience for movies and shows. ThetaDrop NFTs incentivize viewers with TFUEL and introduce a fan reward and engagement program to improve the fan experience.
ThetaDrop NFTs launched in 2021 with the first live streamed World Poker Tour, which has a world wide audience of 140 million. Other leading global brands to join include Katy Perry and many top crypto streamers and influencers.
The ThetaDrop Marketplace, which went live in June 2021, provides a secondary market for users to trade their ThetaDrop NFTs and has generated significant volume and value for both creators and collectors. More than 100,000 ThetaDrop NFTs were sold in the six weeks after launch, generating over $2 million for content creators.
Future NFT plans
In the future, Theta will support decentralized NFT storage. NFT users will own and take custody of their content IP, without relying on any centralized platform for media data storage. An upcoming cross-chain bridge between Theta Network, Ethereum and others will enable NFT transfer and transactions across networks, so users can take their NFTs with them wherever they want to.
Theta has also recently been awarded a US patent for ‘virtual ticket’ NFTs. Think of event and concert tickets on the blockchain. Not only would your NFT ticket provide provable ticket ownership and access to the event, it also doubles as a digital collectible and can provide users in future with fan incentives and rewards like Airdrops.
Theta envisions an ecosystem that operates like a ‘fan lifecycle management system’ – monetising all touch-points of a fan’s engagement with their media or entertainment of choice.
The Theta ecosystem includes a web wallet that you can use to store and stake your THETA, earn and store TFUEL and eventually store your NFTs.
Why we hold Theta
1.Theta could take advantage of two very strong growth trends over the next 5 years – online streaming and online entertainment and media.
Chilliz hosts scaleable tokenized fan engagement ecosystems ready for the worlds biggest sporting clubs to better monetise fan engagement through unique and exclusive engagement experiences and superfan rewards.
It achieves this through a tokenised sports and entertainment exchange. Ticker CHZ is the native digital currency for the Chilliz exchange.
‘Fan token’ economy
The Chilliz concept is based around a fan token economy. For sports clubs and associations, fan tokens are a way of connecting clubs with fans and unlocking new revenue streams and fan value.
Fans purchase tokens on the Chilliz exchange. Fan tokens float on the market and the token price of each moves with that market.
CHZ holders get access to various fan tokens and literally have a stake in their club.
In addition to its token exchange, the company behind Chilliz operates the blockchain-based sports platform Socios.
Socios is a platform where ‘super fans’ can congregate and support their favourite team by buying fan tokens. In return, these tokens allow fans to participate in the governance of their favourite sports brands and provide access to superfan rewards and bonuses.
The Socios platform is just the first example and use case of the Chilliz fan token model.
Chilliz has gamefied their ecosystem. Soccer fans for example can ‘hunt for tokens’ (get them for free) by playing games and participating in activities inside the Socios app. You need to hold CHZ in your Socios App to participate and buy fan tokens. You only need one token to start. Users can rack up rewards and unlock exclusive fan offerings like merch, experiences and VIP access.
Chilliz recently launched it’s first digital collectible NFT with soccer giant AC Milan. NFT drops have eligibility criteria and are designed to incentivise holders of the AC Milan fan token. AC Milan fans can collect and trade the NFT, with ownership authenticated on the blockchain. But what’s really bangin’ about these NFTs is that they have built -n loyalty rewards functions. Holders can use them to unlock experiences and rewards from the club that fiat money just can’t buy.
AC Milan is just the start. Think sports trading cards on steroids with all sorts of built in bonuses….
Why we hold Chilliz
Great concept and clever launch.
Soccer fans are C.R.A.Z.Y passionate. Superfan tokens with exclusive access, club experiences and a chance to participate in club governance sounds like a soccer superfan’s wet dream. The two just work together, if you feel us. What a great proof of concept and demo by Chilliz. We’re not even soccer fans and we want some socios NFTs!
We see no reason the concept and business model can’t work across other major sports. Even other industries like music and movies. Imagine superfans of the TV show Yellowstone buying a show token to get early access to episode drops and vote on storyline and character developments!
The Chilliz model could be as big as your imagination. Esports brands like OG are already on board with the Chilliz concept. Who’s next?
Enjin (ENJ & EFI)
Get your head around this financial freedom seekers. Enjin is a large cap crypto company with a mission to build..
The Enjin product ecosystem comprises a developer platform, product market place, and crypto wallet.
But what products are they focussed on exactly?
Gaming assets – NFT gaming assets that unlock in-game experiences, new levels of play and play to earn opportunities.
Digital art – users can create digital art and monetise it on Enjin, without knowing any code
Sports collectibles – Enjin allows developers and companies to create tradable, programmable, validated and scarce digital sports collectibles to bring more value to fans and more revenue, and
Music tracks – music as own-able and programmable tokens. Simple as that.
Enjin offers users and developers a native platform to build websites and integrate gaming features. You can also create and and run forum boards, NFT shops and gaming guilds using Enjin’s platform.
The Enjin network is built on the Ethereum blockchain. Its gaming and NFT based ecosystem is powered by dual tokens – Enjin Coin (ENJ) and Efinity Token (EFI). Lets look at each.
ENJ is the ecosystem currency for the Enjin Ethereum blockchain. You need ENJ to create and buy ecosystem products. ENJ will also have utility in the Efinity network. ENJ is used to mint NFTs on the Efinity network, where the ‘ENJ-infused’ NFT will be automatically staked and generate passive income in the form of EFI tokens.
ENJ will be transferable between both Enjin and Efinity networks via a cross chain bridge.
Efinity network (EFI)
Efinity Network refers to Enjin’s new Efinity parachain built on Polkadot (instead of Ethereum). Crypto users and NFT holders will use Efinity Network to cheaply and quickly move cryptocurrencies and NFTs between blockchains.
Efinity is trying to resolve some of the transactions costs and other issues of transacting NFTs on the expensive and clogged Ethereum network.
EFI is the native token of Efinity network. Users of Efinity will pay EFI for transaction fees, marketplace commissions, bridging tolls, and smart contract charges. It’s kind of like Ethereum gas fees. EFI is used to automatically reward ENJ stakers for supporting the Efinity network. EFI is what Enjin calls a ‘paratoken’. This means it is compatible with all parachains built on Polkadot and sister network Kusama.
Holders can swap ENJ and EFI for stablecoins and then swap these stablecoins (via a crypto exchange like Binance) into fiat currency (money IRL).
Why we hold Enjin
Multiple use cases
Enjin already integrates with a heap of games with millions of players – like Minecraft and World of Warcraft. But’s its utility is far beyond gaming. With a digital product marketplace and developer platform covering music, art and sports collectibles, the uses cases are mindblowing.
Incumbency, token expansion and user base
Enjin has been around since 2009 and has built Enjin Network (the Enjin blockchain) to a community of 19 million gamers globally. That’s a nice customer base to launch a token ecosystem, an NFT marketplace and NFT developer platform. They’re also expanding their token economy and utility with the Efinity network plans, which is great for ENJ holders.
Where to buy NFT tokens THETA, CHZ and ENJ
Australia – buy with AUD (AUD bank transfer first)
Crypto hedge funds are booming. A crypto hedge fund is a managed investment fund that offers investors exposure to digital assets without actually owning the asset directly. But should you invest in a crypto hedge fund when you can just buy crypto? In this article we help you with information so you can weigh up your options. We’ll cover what crypto hedge funds are, things you should know about crypto hedge funds, and the top 5 crypto hedge funds by assets under management.
What is a crypto hedge fund?
A crypto hedge fund is a type of investment where investors pool their funds together to invest in cryptocurrency assets. Crypto hedge funds are usually operated by an experienced crypto trader or group of traders who have years of experience trading crypto. The fund manager(s) will use the capital from the crypto hedge fund to buy crypto assets, such as Bitcoin and Ethereum.
Hedge funds are known to employ more aggressive investment strategies than other types of funds (ETFs), differentiating them as an investment vehicle. There are different types of investment strategies from longing, shorting and arbitrage trading to more fundamentals based strategies like relative value or tech analysis. The chosen strategy will impact that risk profile of the fund.
The word “hedge” is used because these funds historically focused on hedging risk by buying and shorting assets concurrently, in a long-short equity strategy. They’re not called hedge funds because they protect investors from all of crypto’s investing risks however.
On top of these trading strategies, crypto hedge funds will often stake, lend and borrow coins and tokens to increase the IRR of the fund.
Crypto hedge funds don’t just hold crypto assets. They can invest in crypto adjacent assets. For example, there are funds that invest in and trade blockchain stocks. These are stocks of companies that provide Blockchain products and services.
Crypto hedge funds are different from traditional hedge funds in that they focus only on digital assets associated with cryptocurrencies.
Crypto hedge funds are booming
According to PwC, there were 150 to 200 crypto hedge funds at last count. These funds have total assets under management (AuM) in the billions.
The number of funds set up correlate directly to the price of Bitcoin which is no surprise. Because Bitcoin is booming, so is interest in these kind of more aggressive funds.
Who is investing in them, and how much?
The funds, by their structure and the way they’re regulated, target already wealthy investors. Because they are seen as ‘risky’, the US Securities Exchange Commission (SEC) limits access to hedge funds to ‘accredited investors’. Accredited investors have a net worth of more than $1 million, not including the value of their home, or annual individual incomes over $200,000.
Basically, if you’re a US citizen but you’re not already rich you can’t invest in in any kind of hedge fund, including a crypto one (but by all means take your cash to Vegas and blow it all on black…).
It follows that around 50% of crypto hedge fund clients are high net worth individuals followed by family offices and ‘funds of funds’. The average investment in crypto hedge funds is $1.1 million.
Crypto hedge funds are traditional investment vehicles. They’re a known quantity to traditional investors and these are the investor types they will continue to attract.
3 things to know about crypto hedge funds, before investing
Fees – You have to pay them and they’re high. You pay both management fees AND performance fees for the privilege of investing in these funds.
Management fees – average 2.3%
Performance fees – average 22.5%. Often increase with a higher IRR.
Buy-in hurdles – if you don’t have at least $100k you’re NGMI – not gonna make it. You won’t meet the hurdle rate to invest. You also need to be an accredited investor in the US (see below) and prove it, which means paperwork! Meh…
Redemption gates – you can’t take your investment out whenever you want. There are rules about when and how much of your funds you can access at one time. This, they say, it to prevent pricing impacts from large redemptions. So it’s there to ‘protect’ clients, but it just goes against the grain a little.
Buying crypto hedge funds or owning crypto?
The trade offs
Let’s look at the trade offs and benefits of crypto hedge funds, starting with most important part first – cost and performance.
If funds charge a 2.3% management fee on average plus a 20%+ performance fee, what does the average hedge fund performance look like, versus owning cryptocurrency outright?
According to PwC, the median performance of crypto hedge funds in 2020 across all investment strategy types was 184%. Here’s how that breaks down:
But don’t forget, you’re handing back 20% to 30% of that in fees.
If you had just bought and held Bitcoin your investment would have returned 305% over the same period.
And that’s Bitcoin – the largest large cap crypto of them all. Had you chosen instead to buy and hold a lower cap altcoin, like the Layer 1 protocol Fantom (FTM), your return over 2020 was 1088%.
Here’s something else to consider when it comes to crypto hedge funds. They will invest conservatively for a bunch of reasons; reputation, performance, regulatory obligations etc. In this way, crypto hedge funds are no different from traditional hedge funds.
A recent PwC survey revealed that crypto hedge funds predominantly trade the large cap ‘less risky’ coins that are slower to move and less likely to moon. 92% of crypto hedge funds traded Bitcoin ‘BTC’, followed by Ethereum ‘ETH’ (67%), Litecoin ‘LTC’ (34%), Chainlink‘LINK’ (30%), Polkadot‘DOT’ (28%) and Aave‘AAVE’ (27%).
So what are you trading returns for when you invest in a crypto hedge fund? Exactly what do you get out this kind of investment (if you do meet the buy in hurdle that is).
Time & effort saved
For the fees you pay them, fund managers will do the research for you. They will also manage the blockchain transactions for you. You don’t need to learn anything about crypto – how to use on and off-ramps from fiat, how transact on the blockchain, where to store to coins, etc. etc.
Seen as less risky than coin picking
Hedge funds use more aggressive investing strategies than other funds, but crypto hedge funds are still seen as less risky than owning crypto itself. Why is this?
Firstly, the fund managers do the due diligence for you. They research the companies, projects and code so you don’t have to worry about putting your money into something that turns out to be a rug pull or some other scam. Fraud, scams and rug pulls are a realised risk in crypto for many investors.
Secondly comes diversification. A hedge fund uses the money in the fund to buy into multiple coins, tokens and projects. The concept being, your money is diversified to help reduce single asset risk exposure and soften market volatility.
While they will help you avoid some of the risks inherent in investing in crypto (check out our article on this here), crypto hedge funds are still exposed to broader crypto market volatility. Although they actively seek to manage the impacts, it’s more to dilute than avoid them.
No asset custody worries
You might sleep better at night knowing that you are not responsible for keeping your crypto safe from cyber hack yourself. That’s because buying into one of these funds, you won’t really own any. No need for cold storage wallets, private keys, seed phrase storage, or any of that palaver.
This is a weird one. We’ve always had trouble with the concept of picking investments specifically for the tax advantages, but it can be a nice by-product. If you’re a US Citizen, hedge funds can qualify to be held in IRA and Roth IRA accounts.
Crypto hedge fund list
With over 150 crypto hedge funds in the market, it’s difficult to nail down exactly which one might be right for you. This is precisely why there’s a whole industry of brokers available to refer you to their crypto hedge fund of choice (for a commission or trailing fee of course!). To help out, here’s a list of crypto hedge funds but by no means is it exhaustive. Some of the better known and large fund managers not on the list include: