President Biden last week said that the federal government would be forgiving some government-backed student loan debt. In order to take advantage of the $10,000 debt forgiveness, your yearly income needs to be less than $125,000.
If you file taxes with a spouse, then your collective income must be less than $250,000. Those who received a Pell grant are entitled to a cancellation of up to $20,000 and must meet the same requirements. In addition to the debt cancellation, the Biden administration announced that the payment pause on all student federal loans will be extended until Jan. 1, 2023.
If you're one of those former students who meets the requirements, you might be wondering what you should do with your extra savings. Should you invest in real estate, possibly buy more of your favorite stocks, or perhaps even buy some cryptocurrencies?
On average, the nationwide real estate market increases just 3.5% to 3.8% annually. In addition, with home prices near all-time highs, that $10,000 unfortunately isn't enough for a down payment in most real estate markets. Since its inception, the S&P 500 has returned about 12% annually and is up about 65% since 2017. The tech-heavy Nasdaq has done nearly twice as well over the same time period, putting in a return of 137%.
But if you're looking for investments with both long-term value and growth that could outperform real estate and stocks, here are three cryptocurrencies that meet this criteria: Bitcoin (BTC 5.34%), Ethereum (ETH 2.74%), and Polygon (MATIC -1.42%). Bitcoin has appreciated nearly 350% in the past five years. Ethereum is up just shy of 340%. And although it's only three years old, Polygon has risen over 25,000% since its creation.
The market leader
The case for Bitcoin is relatively simple and straightforward. Bitcoin is the world's most valuable cryptocurrency and makes up nearly 40% of all the value in the entire cryptocurrency market cap. At one point, this number was as high as 90%. Many investors choose to own Bitcoin because of its proven history of performance. It also has unmatched decentralization, security, and increasing scarcity. Furthermore, because most other cryptocurrencies are correlated to Bitcoin's price, investors tend to prefer investing in Bitcoin since it serves as a de facto market index for all cryptocurrencies.
DeFi's dominant blockchain
Ethereum's spot as the second most valuable cryptocurrency boils down to one key innovation: smart contracts. With smart contracts, developers can build applications such as decentralized exchanges like Uniswap, non-fungible tokens, and even lending platforms like Aave and Curve. This class of alternatives to traditional finance makes up a sector known as decentralized finance, or DeFi. When considering that more than half of the $60 billion in all of DeFi is on the Ethereum blockchain, an investment in the smart contract platform is a no-brainer.
Ethereum's sidekick continues to grow
One downfall of Ethereum is that since its popularity has boomed, user traffic has congested the network, making it slow and costly. To remedy this, Polygon was created as a Layer 2 "sidechain" to make Ethereum faster and cheaper to use. Polygon processes transactions separately from Ethereum by using a more affordable and faster proof-of-stake consensus mechanism. Once complete, the transactions are then added back to Ethereum's blockchain for final settlement.
Polygon's popularity has come quite a long way since its creation in 2018. Just this July, Disney selected Polygon to join its venture capital branch known as the Accelerator Program. Disney will now dedicate time, money, and resources to help Polygon fulfill its vision as a blockchain that supports the development of Web3. The ultimate goal is that a partnership will develop between Disney and Polygon as the media giant takes steps to enter the world of NFTs and blockchain technology.
Even though each of these cryptocurrencies have their own unique reasons for deserving a spot in your portfolio, they all have the chance to be leaders of different sectors within crypto. So if you have some leftover funds that were originally destined to pay off student loans, Bitcoin, Ethereum, and Polygon could generate returns that stocks or real estate can't come close to. Over the long haul, these cryptocurrencies are positioned to continue leading a burgeoning asset class that is still growing.