The frugal among you may have a scowl on your face. Interest rates on traditional UK savings accounts are the lowest they’ve been for over 50 years. But there may be reasons to turn that frown upside down if you investigate cryptocurrencies.
Over the last 50 years, interest rates peaked at a whopping 13.56% in 1990. Both the preceding and following year saw double-digit interest rates too. Previously this was only seen once in 1980. But from 1970 to 1998 the rate rarely fell below 5% – averaging 7.82% over the 28 year period. Compare that to the rate of 1.23% in 2016 and things seem a little dire. Compare that to an account that Nationwide are offering in 2017 – an account that anyone can get, and not limited by number of withdrawals – and you’re looking at 0.1%.
The average person in the UK in their 20s earns on average £1,876.50 per month.
Now let’s assume for this example that John saves is entire salary each month in his account. At the end of the year he has £22,518; this entitles him to a whopping £22.52. That’s just not good enough if you’re looking to amass a small fortune.
In the interest of keeping things fair, John could make use of a 5% rate if he was a Nationwide member, he could even find a better than 0.1% deal elsewhere potentially. There are Help-to-Buy ISAs around as well, so there are options better than the 0.1% on offer, but my point is the comparison between now an older generation. Even the traditional, risk-free option of buying government bonds isn’t worth the time at a measly 2.2% return.
Compare that to a cryptocurrency, in this case, Bitcoin, which has seen a yield (in just the last 24 hours at the time of writing) of £526.80 (7.08%). If you could get over 3x the return of a government bond in 24 hours, compared to a year (8,766 hours) wouldn’t you take it? When we take a look at the sheer overall momentum that Bitcoin has had it becomes even more appealing. Here are its gains over the last few years, from earliest to now:
- 2013 to 2014 saw an increase of £483.28 (5,916.05%)
- 2014 to 2015 saw a decrease of £304.76 (62.01%)
- 2015 to 2016 saw an increase of £103.75 (55.57%)
- 2016 to 2017 saw an increase of £522.80 (180.00%)
- Jan 2017 to Jun 2017 saw an increase of £1,008.27 (123.98%)
- Jun 2017 to Nov 2017 saw an increase of £6,150.19 (337.64%)
Now I expect you’ll see that level out as the “discovery boom” of the currency settles down, but let’s think for a moment. I could have bought 10 bitcoin in 2013 for £81.69 and they’d now be worth £79,716.83. That makes me feel a little uneasy.
Compare that to the interest rates we’ve just been speaking about; which one would you prefer to yield?
I’d like to point out that with interest rates you cannot lose money, they are 100% safe. Ok, the bank you have your account with could liquidate and you could lose your money (although this is protected by the FSCS in the UK), but the rate itself wouldn’t be the cause of blame. Whereas, any investment into stock or cryptocurrency can result in financial losses.
However, unlike typical financial institutions, bitcoin resides on the blockchain which is completely decentralised, making investment a little safer. Think of your savings account. The rate is affected by the bank, which is affected by the government, which is affected by the economy. So when we see an economy crash, like in 2008, everything is affected and that’s because it is a centralised economy, with one thing in the middle affecting the rest. As I said, the blockchain is decentralised, so should one part suffer financial loss or decline, it is contained a lot easier and has much less of an effective spread. To give an example, if one of the lesser cryptocurrencies were to crash, it would almost certainly have zero negative impact on ones like Bitcoin.
These are the current top 5 cryptocurrencies by 2017 yield, including current GBP exchange rate:
- Ether with a yield of 5,531.24% at ETH 1 = £367.72
- Dash (not DashCoin) with a yield of 5,240.85% at DASH 1 = £492.96
- Ripple with a yield of 4,280.39% at XRP 1 = £0.2234
- LiteCoin with a yield of 1,972.33% at LTC 1 = £75.64
- Bitcoin with a yield of 927.81% at BTC 1 = £8,323.70
Please note this is the yield for 2017 only, not since the currency’s inception, which may result in a different order.
So, to finish up, this is a market that’s definitely worth keeping an eye on. No longer is this just talk, cryptocurrencies are serious business. I am not recommending leaving your savings accounts behind in favour of these currencies just yet. Though, if I suddenly stop blogging one day, you can assume I’ve invested in the right cryptocurrency and have reaped the rewards!
Disclaimer: please note, however, that I am not a financial advisor and any information written here is my own personal view and opinion and nothing written above should be construed as personal investment advice. The figures contained within believed to be accurate at the time of writing, however, any errors or inaccuracies that are included are the result of the sources of information that I have used. I cannot be held liable for any action or inaction on your part as a result of reading this blog! If in doubt, please consult a professional, licenced financial advisor.
If you have any comments, or if you want to get in touch and talk FinTech (or savings accounts), follow me on Twitter (before I get rich).
I work for Compare the Cloud as programme manager. I enjoy cybersecurity, fintech and, on the less boring side of things, photography, trains (I said less boring, right?) and, like everyone else, music.