Digital currencies are making financial independence a reality, kickstarting a fresh concept called FIRE (Financial Independence - Retire Early)

The changing landscape of investing and rise of access to technology has led to a newer generation of investors adopting cryptocurrencies as a financial instrument. People are now moving towards achieving financial independence and retiring early (FIRE).

Cryptocurrencies are based on the concept of decentralisation, which provides a crucial step in democratising wealth as they place the power in the hands of the investors.

The rapid growth in crypto markets over the last few years is what makes the space attractive to investors. Bitcoin has single-handedly delivered a whopping 1300% return on investment in the last four years. Ether, on the other hand, has grown more than 9000% since 2017.

Crypto exchanges such as WazirX have made it extremely accessible for anyone to invest in cryptocurrencies. The sign-up process is simple, quick, and hassle-free.

In comparison, India’s leading index NIFTY grew by just 90% over the last five years. The NASDAQ 100 fares better at 210% returns, but still fades in front of crypto assets. Even US tech companies such as Netflix have only been able to clock around 420% growth in five years.

While cryptocurrencies have outperformed traditional investments, one of its drawbacks is also immense volatility in the crypto markets. It is important for investors to educate and be wary of cryptocurrencies that are fairly new and offer too good to be true returns.

The internet is filled with pump-and-dump scams that are often very convincing in the beginning. One must do their own research (DYOR) before investing in any financial asset, cryptocurrency or otherwise.

What is FIRE?

FIRE stands for Financial Independence and Retire Early. The former means living a debt-free life, owing nothing to anybody. In contrast, the latter points to retirement before the standard age with enough savings to last your lifetime.

This lifestyle movement has been viral among millennials and implementing it is relatively simple on paper. While you're working, amass, save and invest your money into assets that can generate a passive income.

How are cryptocurrencies enabling FIRE?

The passive income should be able to replace your monthly income in some time, relinquishing you off full-time work. Today, cryptocurrencies such as Bitcoin, Ether, and more can act like investment assets that can benefit over a long-term period. With their adoption slowly rising, there's no denying that cryptocurrencies have established a bare minimum status quo, forcing every government globally to reconsider its stance.

FI Explorer, an early member of the FIRE movement, was trying to accomplish his target when he heard about cryptocurrencies in 2015. He just invested 0.5% of his portfolio ($3,000) in Bitcoin. The incredible growth in the next few years helped him complete his FIRE target of $1.64 million by December 2020 — earlier than he had expected, according to CoinTelegraph.

El Salvador has legalised Bitcoin as legal tender, the first one to do so. And a host of smaller countries are considering the option, challenging the fiat monopoly for the first time since it came into existence.

At the same time, blockchain has a billion applications and is poised to be the next frontier for decentralised governance, privacy, and accessibility. The blockchain ledger cannot be tampered with, automatically adding a layer of security that ensures the authenticity of each token.

A timely investment in a crypto asset has helped many overcome their financial problems, and the movement is just getting started. There are multiple ways of creating an income channel from digital currencies, just like the conventional stock market.

Five ways you can earn money using cryptocurrencies and get to FIRE:

1. Buying and Hodling: The most widely used strategy involves holding (hodling) onto the investment for an extended period. The secret is to ignore short-term volatility and have faith in the assets inherent capabilities, increasing adoption, and future applications. While Bitcoin and Ether are rarely used as currencies today, they could witness a gradual rise in their acceptability over the coming years thanks to an ever-expanding universe of NFTs, QR-based payments, and more. Historically, Bitcoin has undergone a turbulent ride but has regained its lost value soon enough and continues to surge to new peaks. You can buy and hold onto crypto assets via crypto exchanges such as WazirX, which is backed by the world's largest crypto exchange network Binance.
2. Day Trading: While investment is a slow, measured approach, trading is often a fast-paced, high-octane way to make money with equally higher risks. It's usually executed on a short term basis, and traders observe news, events, and market activity at all hours to look for indications that an asset's price could change. It's the same as actively trading on the stock market, but we're trading crypto assets instead of stocks. The volatility (ups and downs) surrounding crypto trading creates the possibility to benefit from high yields.
3. Mining: It's a virtual process that ensures coins are issued only after a certain amount of work is done to ensure no oversupply within the blockchain. Just like we mine conventional gold, crypto-assets can also be mined using cutting edge equipment. One way crypto mining can be profitable is through mining pools. It enables miners to pool their resources, adding power but splitting Bitcoin's difficulty, cost, and reward. There are several well-known Bitcoin mining pools across the globe, including F2Pool, Poolin, and BTC.com.
4. Staking: Coin staking gives currency holders some decision power on the network. By staking coins, you gain the ability to vote and generate an income. Unlike mining, the blockchain depends on Proof of Stake (PoS). Staking involves holding coins in a live wallet, thus allowing you to earn additional coins for securing that particular crypto network. Hence it doesn't require high-end equipment like mining. Interest rates offered by staking can go from 6% per year provided by well-reputed networks like Ethereum and Cardano to as much as 100% offered by smaller networks, for example, PancakeSwap and Kava.
5. ICOs: Keep a lookout for Initial Coin Offerings (ICOs) since it's the easiest way to get your hands on worthy crypto-assets that are in their nascent stage. ICOs have become an essential means to raise funds for blockchain and cryptocurrency start-ups. They are similar to stock market initial public offerings (IPOs), but instead of a company, you're investing in the idea, currency, and its applications.

Disclaimer: Do your own research (DYOR) before investing in any financial asset, cryptocurrency or otherwise.

This is a sponsored post in partnership with WazirX.