There is an old saying, “cash is king,” but if it is sitting in a bank account or, in the case of crypto — a wallet, it diminishes daily due to inflation. This is especially the case now as inflation in the United States breaks its 40-year record. While the dollar-cost-averaging (DCA) strategy allows an investor to minimize the effects of volatility by purchasing an unstable asset in time intervals, inflation still causes a decrease in a target asset’s value over time.
For instance, Solana (SOL) has a pre-set protocol inflation rate of 8%, and if the yield is not generated through farming or utilizing decentralized finance (DeFi), one’s holdings are depreciating at a rate of 8% per year.
However, despite the U.S. Dollar Index (DXY) increasing by 17.3% in a year, as of July 13, 2022, the hopes of receiving significant returns in the bull market are still pushing investors to engage with volatile assets.
In the upcoming “Blockchain Adoption and Use Cases: Finding Solutions in Surprising Ways” report, Cointelegraph Research will dig deeper into different solutions that will help to resist inflation in the bear market.
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Crypto winter is a period where anxiety, panic and depression start to burden investors. However, many crypto cycles have proven that real value capture can be attained during a bear market. For many, the current sentiment is that “buying and hodling” combined with DCA may be one of the best investment strategies during a crypto winter.
In most cases, investors abstain from outright investment and amass capital to purchase assets when the macro condition improves. However, timing the market is challenging and is only feasible for active daily traders. In contrast, the average retail investor carries higher risks and is more vulnerable to losses coming from rapid market changes.
Where to go?
In the midst of various calamities in the crypto universe, placing assets in staking nodes on-chain, locking in liquidity pools, or generating yield through centralized exchanges all come with a hefty amount of risk. Given those uncertainties, the big question remains whether it’s best to just buy and hodl.
Anchor Protocol, Celsius and other yield platforms have recently demonstrated that if the foundation of yield generation is backed poorly by the tokenomics model or the platform’s investment decisions, too-good-to-be-true yields may be replaced by a wave of…
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