Bitcoin Hash Rate and Why It Matters

Recently, Bitcoin has been at or near a record high hash rate. In April 2021, hashing power hit more than 198 quintillion hashes per second (h/s)—a record.

What is Bitcoin’s hash rate? And why is this important for investors? Read on for a full explanation.

What Is Bitcoin’s Hash Rate?

Bitcoin’s hash rate refers to the amount of computing and process power being contributed to the network through mining. Bitcoin mining is a vital process that keeps the digital currency’s network maintained. This happens via a mammoth global network of mining machines (powerful computers built for this task). These machines mine bitcoins by solving complex mathematical computations that verify Bitcoin transactions.

To solve these problems, each machine has to make millions of guesses per second. This requires a lot of electricity. Bitcoin miners consume around 129 Terawatt-hours of energy, which is around 0.6% of the world’s total, according to The University of Cambridge’s Bitcoin electricity consumption index .

And this energy-intensive mining network is still growing. It takes a lot of electricity to keep the blockchain network up to date.

Blocks and the Blockchain

Bitcoin and many other cryptocurrencies are built using blockchain technology. Blocks are similar to files which hold data about the most recent transactions made throughout the network—and in a blockchain, they make a chain, each one dependent on the others.

purchases Bitcoin or uses it as payment, the transaction is recorded on the blockchain. All transactions can be viewed publicly (though anonymously), and they cannot be changed. The Bitcoin blockchain is a decentralized, digital ledger containing a record of all past transactions. The network confirms those transactions, and since the network is decentralized, the ledger’s record is secure.

But since blocks are like data files, larger blocks require more power to verify. That’s where hashing enters the picture. “Hashing” a block is the process of ensuring the validity of the network transactions. As a reward for hashing, miners receive bitcoins.

To successfully mine a block and receive bitcoins, a machine has to hash the block’s header, which is a summary of the information contained within a given block (similar to metadata).

It’s a complex process, but the important thing to know is that the Bitcoin network is designed to make sure that a consistent number of Bitcoins are released into the market over time. To keep this consistent, bitcoin mining becomes more difficult over time.

Miners find the target by trying different combinations of possible numbers and letters in the block header. This varied value field in the block header is called the “nonce.”

The miners always begin with a nonce of zero, and increase it each time they guess, until the target is reached. Important: The chances of landing on the correct hash are very low—hence, the difficulty in mining Bitcoins.

The Bitcoin hash rate is a measurement of how many times the Bitcoin network attempts to complete those calculations each and every second. It’s the approximate average of all the hash rates of each individual miner in the network.

A higher hash rate is better, because it increases the miner’s chances of finding the next block and receiving a Bitcoin reward.

How the Bitcoin Hash Rate Is Measured

The Bitcoin hash rate is expressed as hashes per second (h/s). Bitcoin’s network is large and powerful, and as a result, can calculate quintillions of hashes every second. For reference, a quintillion is a million million millions, or 1,000,000,000,000,000,000.

Fluctuations in Bitcoin’s daily mining power can be significant. Increases or decreases of 10% or more each day are common. But these fluctuations don’t necessarily mean that thousands of miners are joining or leaving the network each day.

Bitcoin’s mean hash rate calculation is not precise. With so many machines running all over the world, analysts can only look to recent market activity to create an estimate of the current hash rate.

Because of that, looking up the current hash rate may yield different results. To get a better sense of the hash rate, looking at longer-term trends—weekly versus daily hash rates, for instance—may be more useful.

Why Hash Rates Matter to Miners

For individual miners, calculating a hash rate can help them predict their profitability.

There are many types of mining machines, and new ones are constantly debuting. Each cryptocurrency is mined with different machines, and they don’t all have the same hash rate—as mining requires different amounts of power, memory, and processing bandwidth.

Individual miners can calculate their personal hash rate using a hash rate calculator. By inputting information about their mining equipment, power and electricity consumption, mining fees, and other relevant information, the hash rate calculator can spit out an earnings estimate.

When mining equipment is upgraded with more powerful machines, the network hash rate might increase as a result. However, a more powerful network doesn’t necessarily result in bitcoins being mined more quickly, as the network is built to release a certain amount at a time.

Changes to hashing power are also related to mining difficulty, the number of miners in the network, and ultimately, profitability for miners.

If new miners join the network, the mining difficulty increases because miners now need to make more guesses each second to solve the calculation and win the block reward.

If the Bitcoin network’s difficulty increases, the hash rate also increases.

Electricity Prices and Profitability

Bitcoin miners must invest in mining machines, storage for those machines, and electricity to keep the machines running. Many mining operations also pay for precise temperature and humidity controls to keep the machines running at an optimized pace.

Double spending can be thought of in this way: If a bank kept two different ledgers of transactions, they could each have different information on them and the same money could be spent multiple times.

How Hash Rate Can Affect Investors

A high hash rate indicates a healthy network, which may, in turn, lead to higher Bitcoin values.

Currently, hash rates are significantly higher than in years past, and should continue to increase. That may mean that Bitcoin values follow—though given the volatility of cryptocurrency, there is no guarantee. Plus, simple supply and demand could become the dominating factor determining Bitcoin’s price going forward.

Past trends are not predictions for the future, and you should do your research and consider your risk tolerance before making any moves.

The Takeaway

The Bitcoin hash rate is the number of times per second that computers on the Bitcoin network are hashing data to verify transactions and perform the encryption that secures the network. The hash rate is an indicator of how healthy the Bitcoin network is at any given time, and is driven primarily by difficulty mining and the number of miners. Generally, a high hash rate is considered a good thing.

Learning about Bitcoin hash rates may only be the beginning of your investing journey. With SoFi Invest®️, members can trade cryptocurrencies like Bitcoin, Ethereum, right on the SoFi app.

Find out how to invest in crypto with SoFi Invest.


Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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Source: sofi.com

What is The Synthetix Network?

According to the Synthetix white paper, Synthetix is a decentralized synthetic asset issuance protocol built on Ethereum. What this means is that the Synthetix network allows people to create synthetic assets, or “synths”.

Synthetic assets are the decentralized finance (DeFi) equivalent of derivatives in traditional finance. Synths take the form of ERC-20 smart contracts that track the returns of a real asset without requiring investors to own that asset. In effect, it can be said that an investor can gain “synthetic” exposure to regular assets in this fashion.

How Do Synths Work?

A synth is a virtual representation of another asset in the form of an ERC-20 smart contract. The smart contract serves to tie the price of the synth to the asset.

Synths can be traded on Kwenta, Synthetix’s decentralized exchange (DEX), and can represent cryptocurrencies, indexes, gold, and more.

Synths utilize decentralized “oracles”, which are price discovery protocols based on smart contracts. These oracles automatically track the price of the asset that a synth represents, allowing investors to hold a synth as if it were actually the underlying asset.

In this way, synths can give crypto investors exposure to assets they wouldn’t normally be able to access through the cryptocurrency ecosystem, such as gold and silver.

Synths are issued on Ethereum, which means users can deposit them on other decentralized finance platforms and earn interest. Some participants in this newly emerging financial system believe that synthetic assets and derivatives are important for the space to mature and become legitimized, as synths and derivatives can help hedge against volatility and facilitate price discovery.

Recommended: What is Ethereum and How Does it Work?

Synths vs Tokenized Commodities

Synths differ from tokenized commodities like Pax Gold (PAXG), created by Paxos, a cryptocurrency backed by physical gold bars. Holding PAXG is intended to give investors a piece of an actual gold bar—someone who holds PAXG has a claim on physical gold that Paxos is holding.

Synths, by contrast, only provide exposure to the price of the underlying asset. For example, a synth for gold would give investors a token they could hold that would mimic the price of gold.

How Does Synthetix Exchange Work?

Users can trade synths on Kwenta, the decentralized exchange (DEX) for Synthetix, as well as across a variety of different DeFi protocols. Unlike other exchanges, Kwenta has no order book that contains buy and sell orders. Instead, Kwenta uses peer-to-contract trading, meaning all trades get executed via smart contracts.

Proponents of Synthetix claim this type of exchange has a few key advantages.

Infinite liquidity: Traders don’t have to worry about “slippage,” or driving prices down when they place large sell orders, reducing their overall profits.
Censorship resistance: Since the system is decentralized and governed by smart contracts, it is free and open to everyone (and resistant to censorship). In fact, users don’t even have to create an account to start using Kwenta.

Oracles from another DeFi protocol called Chainlink (LINK) provide the price feeds that set exchange rates for each synthetic asset. This differs from traditional exchanges, where prices are determined by the point at which buyers and sellers are willing to meet. Trades come with fees of between 0.3% and 1%, and the proceeds get sent to a pool where SNX stakers claim them as rewards for staking tokens.

Is Synthetix a Good Investment?

As with all altcoins, trading SNX can be highly volatile and is widely considered to be a speculative investment.

There are thousands of altcoins, and over the years many of them have seen their values fall to zero or very close to it. These coins tend to make a few people large profits during the speculative mania phase, and then bring large losses to everyone else afterward.

Some investors might believe that certain cryptocurrency projects like Synthetix have the potential to grow into something large and significant in the future (although altcoins in general have failed to do so yet). It’s possible that DeFi protocols like Synthetix could wind up becoming part of a new financial system, in which case the SNX token might perform well.

It’s also possible that decentralized finance as a whole could fail for a variety of potential reasons, in which case SNX and other tokens like it would all go to zero.

Recommended: 2021 Guide to Crypto Trading

How Do You Make Money on Synthetix?

There are a few ways to potentially profit from Synthetix.

Buy SNX, the Synthetix network token, on an exchange. If the price rises, then a profit will be realized.

Trade synthetic assets on Kwenta. If a trader holds synthetic gold or Bitcoin, for example, and the price of those assets rise, then the price of the synths should also rise.

Users can stake their SNX tokens and earn passive income rewards on a regular basis.

How Do You Trade On Synthetix?

There are two ways to start trading synths.

A user can purchase ETH on an exchange before exchanging that ETH for sUSD on Kwenta. The sUSD can then be exchanged for other synths.

A user can obtain SNX tokens on an exchange, then stake their SNX on a decentralized application created by Synthetix called Mintr. At this point, users can create synths and start trading them on Kwenta.

As of March 2021, Kwenta users have the option to trade 13 different cryptocurrencies and their inverse counterparts (inverse cryptocurrencies inversely track the price of cryptocurrencies, providing a way to short them), synthetic gold and silver, and several synthetic government-issued fiat currencies. The Synthetix website lists five categories of synths, including commodities, fiat currencies, cryptocurrencies, inverse cryptocurrencies, and cryptocurrency indexes.

There are also two synthetic cryptocurrency indexes offered by Synthetix: sDEFI, an index that tracks a basket of DeFi assets, and sCEX, which tracks a basket of exchange tokens (e.g., Binance coin).

The Takeaway

Synthetix enables cryptocurrency users to invest in certain assets via proxy mechanisms called synthetics or “synths” for short. Powered by the Synthetix network token (SNX), users can create their own synths and trade them on a decentralized exchange. To create synths, users must stake a certain amount of SNX to collateralize the new synthetic assets.

For some crypto investors, Synthetix might be a step too deep into cryptocurrency waters. Looking for a more straightforward way to invest in crypto? With SoFi Invest® crypto trading, members can buy coins like Bitcoin, Ethereum, and Litecoin, starting with just $10, right from the SoFi app.

Find out how to invest in cryptocurrency with SoFi Invest.


SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).

2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.

3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or pre-qualification for any loan product offered by SoFi Lending Corp and/or its affiliates.
Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
SOIN21128

Source: sofi.com

What Are NFTs (Non-fungible Tokens)?

Non-fungible tokens (NFT) are cryptographic digital assets that each have uniquely identifiable metadata and codes. Their data is stored on the blockchain, ensuring they can’t be replicated or forged.

The tokens act as a representation, like an IOU, for either digital or tangible items. For instance, one could create NFTs that stand for digital artwork, virtual real estate in a game, collectible Pokemon cards, or even someone’s personal identification information.

Currently the majority of the NFT market is focused on collectibles like sports cards and digital art. But there are other highly priced NFTs on the market as well, such as a tokenized version of the first-ever tweet, created by Twitter CEO Jack Dorsey.

Let’s dive into the details about how NFTs work, what they’re important, and what makes them valuable.

What are NFTs Used For?

The concept of digital representations of material items is not new. But the addition of blockchain technology makes NFTs important. As part of a blockchain, NFTs are easily verifiable and unique, each one able to be traced back to the original issuer.

NFTs are revolutionizing gaming, art, and the collectibles market. They also have the potential to transform real estate, travel, and identity management. Millions of dollars have been spent on NFTs over the past few years, and their popularity is increasing amongst both collectors and crypto traders.

NFTs and Gaming

For the first time, immutable ownership and efficient sale of collectible and in-game items is possible. This opens up many opportunities for online gaming and world creation. For instance, within virtual worlds like Decentraland and The Sandbox, players can create pretty much any business one might create offline—design and sell hats, create avatars, or sell theme park tickets. Players can even create in-game currencies to sell to other users.

NFTs and Art

NFTs are revolutionizing the art world. Using an NFT exchange, artists can sell digital art directly to buyers, removing the need for a gallery or auction house. Typically, middle men can take a large percentage of sale profits, which means artists may be able to increase their profits using NFTs. It’s even possible for artists to earn royalties each time their artwork or music is sold. The most expensive digital art sold so far was a group of NFTs created by Beeple which sold for over $69 million.

NFTs and Identity Management

There are also use cases for NFTs in identity management. Currently people around the world travel with physical passports, which can easily be lost or stolen, and even replicated or forged. Storing identity information on the blockchain has the potential to eliminate these risks and may one day make travel processing more efficient.

NFTs and Real Estate

Another use case for NFTs is in real estate. Dividing up a property is difficult, but dividing digital real estate is easy. Multiple people can invest in and exchange property if it has been digitized. This principle can also be applied to other material assets.

NFTs and Supply Chain

NFTs can also help improve and validate supply chains. For instance, a coffee company could prove that their beans are fair trade. A wine company could create an NFT for each bottle of wine to keep track of every step of its production.

NFT Standards

Most NFT tokens are currently created using one of two Ethereum token protocols, ERC-721 or ERC-1155. These are essentially blueprints for tokens that were created by the Ethereum team. The blueprint creates a template for certain information that must be included for any new NFT, such as security and ownership information. By standardizing the way this information is created, NFTs are easily distributed and exchanged.

Starting with a blueprint, software developers can create NFTs that are compatible with large public exchanges and NFT wallets such as MyEtherWallet and MetaMask. This ensures that people can buy and sell the NFT and hold it in their own personal wallet.

Other blockchain networks such as Tron, Neo, and Eos are also building out NFT token standards. Each one has different token functionality, so software developers can choose which platform is best for the token they are creating.

What Makes NFTs Valuable?

As with any type of asset, supply and demand drives the price of NFTs. Since there are only so many of each collection of NFTs or individual NFTs, this can make the demand for them very high.

One might wonder what the value would be in owning a representation of a limited edition item as opposed to the real thing. NFTs are both easily verifiable and completely unique. This makes them easily tradable online. Their code is also useful because each NFT can be traced, including past transactions of that token. This provides security, transparency, and prevents fraudulent items from being sold.

Gamers, investors, and collectors have been flocking to the NFT market because they see the potential for market growth and significant profits.

Within certain online games, for example, real estate is a prized possession. If one owns a plot of land on a main road in a virtual world where they could open up a casino, that has the potential to make a lot of money. So that plot of land is very valuable.

Are NFTs Cryptocurrencies?

Cryptocurrencies, like physical money, are fungible assets, which can be exchanged and used for financial transactions because they are identical to one another. For example, one USD is always equal in value to another USD. Although NFTs are built on blockchain technology, they aren’t the same as cryptocurrencies, in that they can’t be exchanged with one another. Think of an NFT like a passport or a ticket to an event. Each one is unique.

An NFT that represents a baseball card can’t be directly exchanged for one that represents a piece of digital art. And even an NFT that represents one baseball card can’t be exchanged for one that represents a different baseball card. The reason for this is that each NFT is unique and contains specific identification information.

However, NFTs are similar to cryptocurrencies in that they have attributes and metadata that makes them easily transferable and identifiable.

Key Characteristics of NFTs

There are several characteristics of NFTs that make them different from other types of assets and that appeal to investors. They are:

•   Indivisible: Unlike Bitcoin or other forms of cryptocurrency, NFTs can only be bought and sold in their entirety. They can’t be divided into smaller portions.
•   Non-interoperable: Just as NFTs can’t be exchanged for one another, one type of NFT can’t be used in another NFT system or collection. NFTs used in online games, for instance, are like a playing card or game piece. Just as a Monopoly piece can’t be used in the game of Life, the owner of a CryptoKitties NFT can’t use that NFT in the Gods Unchained game.
•   Indestructible: Token information is securely stored on the blockchain using smart contracts. This means NFTs can’t be erased or copied.
•   Immutable: One important characteristic of NFTs is that the person who buys one actually has possession of it. They can sell it or hold it. It’s not held by a company the way iTunes holds music and licenses it out for users to listen to.
•   Verifiable: The creation, transaction, and identification information for NFTs can be traced and verified without a third party. This allows anyone interested in buying an NFT to make sure it’s legitimate and do their own vetting before purchase. It prevents the creation and sale of fraudulent tokens.
•   Extensible: Two NFTs can be combined to create a new, unique NFT.
•   Capable of storing metadata: NFT creators and owners can add metadata to NFTs. For instance, an artist could sign their digital artwork.

The Takeaway

The NFT market is still new and full of potential for creators and investors. However, before investing in cryptocurrencies, NFTs, or any other digital asset, it’s important to research and understand the market.

One way to get started investing in digital assets is with SoFi Invest®. Members can trade cryptocurrencies like Bitcoin, Ethereum, and Litecoin, right from the convenient mobile app.

Find out how to invest in crypto with SoFi Invest.



SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).

2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.

3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or pre-qualification for any loan product offered by SoFi Lending Corp and/or its affiliates.
Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.

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Source: sofi.com

How to Use the Fear and Greed Index to Your Advantage

CNN’s Fear and Greed Index tries to track which emotion is driving the stock market. The index is based on the premise that fear and greed influence investment behavior, with investors selling shares when they’re scared and buying them when they desire greater profits.

Here’s a closer look at how the Fear and Greed Index (FGI) gets calculated, as well as how investors can use the gauge to inform their investment decisions.

Understanding the Fear and Greed Index

The Fear and Greed Index uses a scale of 0 to 100. The higher the reading, the greedier investors are, with 50 signaling that investors are neutral. To give some historical context, on Sept. 17, 2008, during the height of the financial crisis, the Fear and Greed Index logged a low of 12.

Seven different indicators are used to calculate the Fear and Greed Index.

CNN tracks how much each indicator has veered from its average versus how much it normally veers. Then each indicator is given equal weighting when it comes to the final reading. Here are the seven inputs.

  1. Stock Price Momentum: The S&P 500 versus its 125-day moving average. Looking at the benchmark equity gauge relative to its own history can measure how the index’s 500 companies are getting valued.

  2. Stock Price Strength: The number of stocks hitting 52-week highs and lows on the New York Stock Exchange. Share prices of public companies can signal whether they’re getting overvalued or undervalued.

  3. Stock Price Breadth: The volume of shares trading in stocks on the rise versus those declining. Market breadth can be used to gauge how widespread bullish or bearish sentiment is.

  4. Put and Call Options: The ratio of bullish call options trades versus bearish put options trades. Options give the right not the obligation to buy or sell an asset. Therefore, more trades of calls over puts could indicate investors are feeling optimistic about snapping up shares in the future.

  5. Junk Bond Demand: The spread between yields on investment-grade bonds and junk or high-yield bonds. Bond prices move in the opposite direction of yields. So when yields of higher-quality investment-grade bonds are climbing relative to yields on junkier debt, investors are seeking riskier assets.

  6. Market Volatility: The Cboe Volatility Index, also known as VIX, is designed to track investor expectations for volatility 30 days out. Rising expectations for stock market turbulence could be an indicator of fear.

  7. Safe Haven Demand: The difference in returns from stocks versus Treasures. How much investors are favoring riskier markets like equities versus safer assets like U.S. government bonds can indicate sentiment.

On its website for the Fear and Greed Index, CNN gives a breakdown for how each indicator is faring. For instance, whether each measure is showing Extreme Fear, Fear, Neutral, Greed, or Extreme Greed among investors.
“Stock Price Strength” might be showing Extreme Greed even as “Safe Haven Demand” is signaling Extreme Fear.

Dos and Don’ts of Using the Fear and Greed Index

Why is the Fear and Greed Index useful? For the same reason why it can be helpful to check the temperature of any setting.

Gauging how hot or cold can help determine which move you want to make next as an investor. Are you being too greedy? Too fearful? Is now the time to think about herd mentality?

Also generally, some investors often try to be contrarian, so when markets appear frothy and the rest of the herd appears to be overvaluing assets, investors try to sell, and vice versa.

Recommended: Should I Pull My Money Out of the Stock Market?

Do’s

Use the index to realize that investing can be emotional but it shouldn’t be.

Use it to determine when to enter the market. Let’s say for instance you’ve been monitoring a stock that becomes further undervalued as investor fear rises, that could be a good time to buy the stock.

Recommended: Timing the Stock Market

Don’ts

Don’t only rely on the Fear and Greed Index or other investor sentiment measures as the sole factor in making
investment decisions. Fundamentals–like how much the economy is growing or how quickly companies in your portfolio are growing revenue and earnings–are important.

For instance, the FGI may be signaling extreme greed at some point, with all seven metrics also flashing greed. However, this extreme bullishness may be warranted if the economy is firing on all cylinders, allowing companies to hire and consumers to buy up goods.

Recommended: Using Fundamental Analysis on Stocks

The Takeaway

The Fear and Greed Index is one of many gauges that tracks investor sentiment. Investors generally use it to take a contrarian view of the markets, so when the rest of the herd appears fearful, they buy, or if they’re greedy, they sell. While it can be a useful tool to decide timing on certain investments, it shouldn’t be used as the only determinant in investment decisions.

Ready to buy and sell stocks, ETFs, fractional shares, or cryptocurrencies on your own? Online trading with SoFi Invest offers an Active Investing platform, where investors can make their own decisions on how they want to build their portfolios. If choosing your own investments is not for you, the Automated Investing services takes into account your preferences and manages a diversified portfolio for you.

Start trading on SoFi Invest today.


SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).

2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.

3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or pre-qualification for any loan product offered by SoFi Lending Corp and/or its affiliates.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
SOIN21025

Source: sofi.com

5 Pick-and-Shovel Solar Stocks for the Green Energy Gold Rush

The solar energy boom is the modern equivalent of the California Gold Rush of 1848.  

Data from Wood Mackenzie Power & Renewables and the Solar Energy Industries Association notes that it took 40 years to reach 1 million solar installations in the U.S., but just three more years to hit 2 million installations. And the forecast for 2021 alone is 3 million installations.  

Green energy exchange-traded funds (ETFs) are on the rise as earnings improve and investors pile into solar stocks. This is evidenced in the bellwether Invesco Solar ETF (TAN), which has more than doubled over the past year, though lately, it has cooled off.  

With climate change firmly atop the Biden administration’s agenda, the set up for solar stocks looks good. 

And like the supply companies that profited during the gold rush selling picks and shovels to eager prospectors, solar energy offers a similar “pick and shovel” opportunity. Companies that make components, batteries, the materials to produce panels or the software to manage them are riding the coattails of the inexorable march away from fossil fuels and toward solar power. 

Here are five of the best solar stocks that offer a differentiated strategy for profiting from the green energy boom.   

Data is as of May 10. 

1 of 5

SolarEdge Technologies

residential solar panelsresidential solar panels
  • Market value: $11.1 billion

Israel-based SolarEdge Technologies (SEDG, $213.34) makes inverters, a key component of the microgrid that delivers solar energy to where it’s needed in homes, schools, businesses, campuses and beyond.   

Shares of SEDG have been on a tear the last two years, but have declined more recently to current levels near $210 since hitting an all-time closing high near $365 in December.  

Sentiment has likely tempered on the solar stock thanks to a modest 2% rise in 2020 revenues and a 3% drop in net income. The company’s earnings release was mum on the precise reason for this, but declines in both gross and operating margins suggests that as the market for microgrids expands, so too do costs, at least at this stage of the game.

This should be of little concern for longer-term investors looking at solar stocks. 

First, SEDG is sitting on just over $1 billion in cash and marketable securities, with just $17 million in debt due this year.  

Next, cash flow from operations for 2020 was $223 million, almost twice reported net income, and this easily covered $126 million in capital expenditures (CapEx) with a sizable cushion left over.  

Finally, about 40% of SEDG sales come from the U.S. While renewable energy policies have been wobbly, a progressive administration coupled with 37 states that have renewable energy targets offers a good set up for sales and earnings growth. 

Consensus estimates for SolarEdge Technologies’ fiscal 2021 are $3.82 per share, which, if realized, would represent a 37% jump from 2020 basic earnings per share (EPS) of $2.79 – a pretty nice bump.

2 of 5

Enphase Energy

solar power invertersolar power inverter
  • Market value: $16.0 billion

Enphase Energy (ENPH, $118.12) also manufactures inverter systems. Unlike “string converters” made by SolarEdge, which draw power wholesale from all the panels in an installation, Enphase sells microinverters, which draw energy from individual panels as needed or as conditions allow, and, as a result, can be more efficient.    

Though microinverters cost more, the market for them may grow faster because they can be more responsive to site-specific conditions. Estimated average annual global growth for microinverters through 2025 is 21% versus about 15% for string inverters, according to Research and Markets, a market research firm. 

For investors who believe in the underlying fundamentals of the solar market and who are looking to buy the dips, Enphase might be the stock for you. 

Shares of the solar stock are off from their February highs of over $200, and took another hit after Enphase’s first-quarter report. While sales grew an impressive 46% year-over-year, earnings declined and ENPH reduced its second-quarter outlook based on semiconductor shortages and supply chain interruptions.

Enphase can weather these kinds of storms for now. It’s sitting on about $1.5 billion in cash, and while long-term debt is just over $900 million, the current portion is just $84 million. Operations last year threw off about $216 million in cash, while capital expenditures were modest at about $25 million. 

3 of 5

Generac Holdings

generatorgenerator
  • Market value: $19.2 billion

Generac Holdings (GNRC, $305.21) has grown handsomely selling backup generators to consumers who have become more attuned to and proactive toward power outages. Ice storms in Texas and fires in California offer vivid reminders about the importance of backup power. 

But in 2019, Generac entered the battery storage business with a pair of acquisitions. By purchasing Pika Energy and Neurio Technology, GNRC positioned itself to develop and distribute its PWRcell and PWRview solar power products.   

Sales are small and not broken out on earnings reports, but Generac touts PWRcell as a high-growth area for the company. And what we’re seeing with PWRcell today might be the thin end of the wedge, a set up many investors like. Think Apple (AAPL), where the relatively small services division is expected to be the next big leg of growth for the company, and contributed to about 19% of total sales in its fiscal second quarter. And at Amazon.com (AMZN), its web services division – at about 10% of total sales – is seen as one of the linchpins of the company’s growth. 

Generac enters the solar business with two distinct advantages. First, it’s reliably growing in its core generator business, increasing sales and cash flow at an average annual rate of 10% during the last five years, according to Value Line. Notably, cash flow from operations last year was some $487 million, plenty to finance its foray into the solar business.   

Second, unlike Enphase and SolarEdge, which rely principally on third-party sellers and are relatively young companies, Generac has been doing business since 1959, has a global network of 7,000 dealers and has decades of customer data that it can ply with its solar offering. 

Shares have been highfliers, up more than 250% since April of last year.  Arguably, much of the enthusiasm is being driven by generators, but GNRC could emerge as one of the best solar stocks as its green energy business takes hold. 

4 of 5

Daqo New Energy

Raw polysiliconRaw polysilicon
  • Market value: $5.3 billion

Daqo New Energy (DQ, $72.15) is based in China and produces polysilicon, which is used to make solar panels. Right now, China is the world’s largest producer of solar panels, and as a result, Daqo is well-positioned to capitalize on the country’s leadership in this green energy space. 

Another driver for Daqo shares is that demand for polysilicon is increasing and this is boosting prices. For instance, according to Bernreuter Research, in 2021 alone, prices per kilogram for polysilicon have risen from $11 to nearly $19, growth which goes straight to Daqo’s top line. Daqo is solidly profitable, and price increases for its core product are driving increases in its gross and operating margins.    

Chinese companies have been chipping away at the hegemony of Western polysilicon producers. Daqo, which is among the top 10 polysilicon producers in the world, typifies this trend with its recently announced production expansion which will add 35,000 metric tons of capacity, an increase of some 45%. 

With solar booming, Daqo will presumably find a home for all of this new polysilicon, at what looks like increasing prices and better margins. This could make DAQO one of the best solar stocks to have on your radar.

5 of 5

CleanSpark

green technologygreen technology

Market value: $549.6 million

Almost nothing in this world works without software, and solar power is no exception. CleanSpark (CLSK, $16.23) offers a suite of software solutions that provide end-to-end microgrid modeling, communications and energy management. 

CleanSpark is tiny, but its market cap, at about $550 million, suggests some investors think it could be mighty. CLSK is not for the faint of heart, but the fact that it’s showing some momentum above and beyond what’s been seen in the broader green energy sector is notable. In the first three months of 2021, sales were up over 120% year-over-year.  And as of mid-April, the company reported significant growth in its backlog – up 220% from mid-February.   

CleanSpark doesn’t make money yet, but analysts are forecasting it will report a profit at the end of this quarter. If it does, catching the solar stock now might be a tenable first step in building a larger position long term. Of note, the second quarter earnings estimate, now 8 cents per share , has come down from an estimated 22 cents per share earlier this year, so conviction may be on the wane. 

Also noteworthy, CleanSpark is ramping up its participation in the Bitcoin mining business. Mining revenue didn’t appear as a line item on its most recent annual report, but it did show up in CLSK’s first-quarter results. And in April of this year, the company announced a material expansion of its Bitcoin mining operations.  

Carbon-belching Bitcoin mining and renewable energy can be somewhat at odds, but CleanSpark notes that 95% of the power for its mining operations is carbon free – an important marker for ESG investors, those focused on environmental, social and corporate governance, and perhaps a source of buying or support for the solar stock going forward. 

Source: kiplinger.com

Angel Investors: What They Are and How to Find Them

Getting a startup off the ground is a daunting task, and finding money is one of many hurdles facing a would-be entrepreneur. There are several ways a new small business might try to secure money for expansion or growth, from friends to bank lenders to joining a startup accelerator program. Angel investors are another option, and can provide capital or financial support to startups in exchange for a share of ownership.

What Is an Angel Investor?

An angel investor is typically a high-net-worth individual or a group of wealthy individuals who invest their money in a venture—usually a startup or small business in its early stages—in return for an equity share in it.

Angel investors typically invest in startups that have the potential to grow and have minimal downside risk in the long term. An angel investor may provide a one-time investment in a company, or they may provide ongoing support. They may also be called private investors, seed investors, or just “angels,” for short.

If you’ve ever watched the show Shark Tank, you’ve seen angel investors in action. On the show, a group of wealthy investors listen to pitches from entrepreneurs who are looking for funding for their small business or startup. In exchange for funding, these investors generally ask for an ownership share in the business.

Who Can Be an Angel Investor?

Angel investors used to have to be accredited investors, which required, among other things, that they have a net worth of $1 million in assets, not including personal residences, or yearly income greater than $200,000 alone or $300,000 household for the previous two years. (Anyone who holds a Series 7, Series 65, or Series 82 in good standing also qualifies).

This was meant to limit angel investing—which is a risky practice—to those who ostensibly had enough assets to safely dabble in it. In recent years, however, anyone can be an angel investor.

Ways to Become an Angel Investor With Less Cash

Angel investing is undoubtedly risky—businesses fail all the time. However, lately it is possible to get involved in angel investing without putting tens of thousands of dollars on the line. (A smaller investment won’t reduce the risk, but it may potentially reduce an investor’s total loss.) These crowdfunding platforms enable smaller investors to dip their toes in the water:

•   WeFunder is an equity crowdfunding site that allows you to invest as little as $100 in startups and small businesses. The site encourages investors to invest in companies and products they love and believe in. Although the investment is smaller than might be typical, the site still describes these investments as risky and advises that people don’t invest money they can’t afford to lose.

•   SeedInvest is an equity crowdfunding site that allows users to get started with $1,000. The company vets all startups on the platform and offers a variety of investment opportunities. The site notes that early-stage investors should expect to hold their investments for at least five years, and that there is no guarantee on returns.

What are the Pros of Using Angel Investors?

There are a number of benefits to using angel investors to help finance a venture.

Less risk

If you take out a loan to finance your business, you’ll still be expected to pay it back, whether or not your venture is a success. Angel investors generally understand the risk of investing in a startup business, and may not expect any return on capital if the business goes south.

Expertise

If angel investors also happen to be experts in your business, they can offer advice and guidance based on their years of experience.

Credibility

Angel investors are often well-known in their field, and if they invest in your idea, it can boost your reputation and status to have them on board.

They’re Willing to Take a Leap

Unlike a bank, which may need more concrete proof that you’re onto something big, an angel investor might be more willing to gamble on your great idea.

Better Chance of Success

Companies with angel investor interest stand a greater chance of survival than those with less angel investor interest, according to 2016 findings from the National Bureau of Economic Research . Though there hasn’t been a more recent study to confirm these findings in the current economic climate, it’s possible that simply having angel investors on board can strengthen your outcome.

What are the Cons of Angel Investors?

There are also some potential disadvantages to having angel investors.

Loss of Full Ownership

Angel investors often provide funding in return for a share of the business, so involving angel investors means giving up some of your control. It also means that if the business succeeds, they’ll share in the proceeds.

They May Add Pressure

Angel investors aren’t giving you money out of kindness and good will. They may be aggressive investors who expect to see a high return on their investment. If they’re sinking money into your venture, it may feel there’s more riding on your success or failure.

Funding May Be Slow

Finding angel investors can take time, and the process of securing backers—and for the cash to find its way to your venture—can take even longer.

It’s a Competitive Market

Even if you have a brilliant idea, there’s no guarantee that you’ll be able to find backers for it. Although there were 323,365 active angel investors in 2019, only 63,730 entrepreneurial ventures received angel funding, according to an analysis by the University of New Hampshire Center for Venture Research.

Where to Find Angel Investors

Startups looking for early-stage investors can look in several places.

Friends and family

Most commonly, startups get much of their initial investment from friends and family who believe in their idea and want to support the venture.

High-Net-Worth Individuals

Networking within your business community may allow you to make connections with people who’d be interested in helping to back your idea. It can be helpful to join local business, trade, and community organizations. Attend meetings and trade fairs, and have your elevator pitch well-honed.

Angel Funding Groups

There are a number of sites that seek to match entrepreneurs with angel investors, including:

Angel Capital Association : A collective of accredited angel investors
Golden Seeds : A group whose members focus on women-led ventures
Angel Investment Network : A network that seeks to connect entrepreneurs with business angels

Crowdfunding sites

While traditional angel groups seek to match entrepreneurs with accredited investors, crowdfunding sites allow lots of smaller investors to pitch in to move your venture along. (Picture a GoFundMe for your business idea.) These include SeedInvest ,LocalStake , WeFunder , and Fundable .

You’ll likely have to apply to have your idea or business vetted by the site before they’ll present your ask to their members.

The Takeaway

Angel investors are typically high-net-worth individual or group backers that support startup and early-stage business ventures. But lately, opportunities have opened up for individuals of all types to invest in companies that have recently launched.

For entrepreneurs, an angel investor can be an enormous help, both in terms of financing their dream as well as providing guidance if they have relevant business experience. On the flip side, some entrepreneurs may find there is added pressure to deliver when an angel investor is backing their startup.

No matter your reason for managing your own investments—whether to fund your dream, or to one day help fund someone else’s— a SoFi Invest® online brokerage account might be a great place to start. Members can purchase fractional shares, trade stocks, ETFs, and crypto, or try automated investing for a more hands-off approach.

Find out how to make the most of your investments with SoFi.



SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
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For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or pre-qualification for any loan product offered by SoFi Lending Corp and/or its affiliates.
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Guide to Crypto Staking: What it is, How it works, and How to Get Started

Generally, when investors contemplate investing in cryptocurrencies, they think about either mining crypto or purchasing it outright on a crypto exchange. But crypto staking—or staking coins, as it’s often called—is another viable alternative for the crypto-curious to get assets in their wallets.

While “staking” may be a relatively new addition to the financial lexicon, it’s important for those interested in crypto investing to understand what it is, how it works, and what cryptocurrencies it can be used to obtain.

Crypto staking may feel like it’s a step beyond simply learning how to buy Bitcoin or how a crypto exchange works, but learning about cryptocurrency staking can broaden your knowledge, making you a more informed investor.

This article will run through it all, from staking basics to the platforms investors can use for staking coins.

Crypto Staking 101: What is Staking Coins?

Crypto staking is the process of locking up crypto holdings in order to obtain rewards or earn interest. Cryptocurrencies are built with blockchain technology, in which crypto transactions are verified, and the resulting data is stored on the blockchain. Staking is another way to describe validating those transactions on a blockchain.

Depending on the types of cryptocurrency you’re working with and its supporting technologies, these validation processes are called “proof-of-stake” or “proof-of-work.” Each of these processes help crypto networks achieve consensus, or confirmation that all of the transaction data adds up to what it should.

But achieving that consensus requires participants. That’s what staking is—investors who actively hold onto, or lock up their crypto holdings in their digital wallet are participating in these networks’ consensus-taking processes. Stakers are, in essence, approving and verifying transactions on the blockchain.

For doing so, the networks reward those investors. The specific rewards will depend on the network.

It may be helpful to think of crypto staking as similar to depositing cash in a savings account. The depositor earns interest on their money while it’s in the bank, as a reward from the bank, who uses the money for other purposes (lending, etc.). Staking coins is, then, similar to earning interest.

How crypto staking works

For the investor, crypto staking is a passive activity. When a crypto investor stakes their holdings (in other words, leaves them in their wallet), the network can use those holdings to forge new blocks on the blockchain. The more crypto you’re staking, the better the odds are that your holdings will be selected.

Information is “written” into the new block, and the investor’s holdings are used to validate it. Since coins already have “baked in” data from the blockchain, they can be used as validators. Then, for allowing those holdings to be used as validators, the network rewards the staker.

Pros & Cons of Staking Coins

Because staking coins is a passive form of investment, there is little downside. But it helps to consider the block rewards associated with staking coins you hold, as well as to recognize the volatility of cryptocurrency in general—if the value of the coin drops, that would impact the value of your staking interest earned.

Popular Types of Staking Coins

There are many different types of cryptocurrency, and many of them can be staked to earn rewards. While this is far from an exhaustive list, here are a few cryptos and coins that can be staked to earn returns:

•   Ethereum: Ethereum has become one of the most popular cryptocurrencies on the market—although it is not exactly a cryptocurrency itself. Staking Ethereum on your own will require a minimum of 32 ETH. Rewards vary, but it’s expected that the rate of return on Ethereum staking is 5-17% per year.

•   EOS: EOS is similar to Ethereum in that it’s used to support decentralized programs. EOS tokens are native to the EOS blockchain, and like other cryptos, can be staked to earn rewards. As of late April 2021, the expected rate of return for EOS staking is 3.2%.

•   Tezos: Like EOS and Ethereum, Tezos is an open-source blockchain network with its own native currency, with a symbol of XTZ. And it, too, can be staked on certain platforms and networks. The current expected rate of return for Tezos staking is around 6%.

How to Start Staking Crypto

To start crypto staking, an investor needs to decide where and what they want to stake. Here are four simple steps to get started.

1. Choose a crypto or coin to stake.
2. Choose and download a digital wallet in which to store your coins for staking. That may mean going directly to the specific crypto’s main website and downloading its corresponding wallet.
3. Purchase at least the minimum required number of coins. Some networks require that stakers have a minimum number of coins to participate (for example, Ethereum holders must have 32).
4. Make sure you have the necessary computing power and an uninterrupted internet connection.

With everything in place, the staking process can begin in earnest. From here, most people will only need to check in on their crypto holdings every once in a while to make sure everything is humming along as it should.

Where to Stake Crypto

There are numerous platforms that allow users to start staking coins, and quickly.

There are big-name platforms that most crypto investors are probably familiar with, including Coinbase and Kraken, which allow users to stake coins. On exchanges like these, investors must opt in to staking in order to benefit from rewards.

Enterprising stakers could also look at “staking-as-a-service” providers—which specialize in staking, rather than exchanging. Examples of those platforms include MyContainer, Stake Capital, and Staked.

It’s important to note that each of these platforms will have different offerings, rules, and fees. It’s worth the time spent researching a few to make sure your goals align with a certain platform before you jump in.

The Takeaway

Staking is a way to use your crypto holdings or coins to earn additional rewards. It can be helpful to think of it as along the lines of generating interest on cash savings, or earning dividends on stock holdings.

Essentially, coin holders allow their crypto to be used as a part of the blockchain validation process, and are rewarded by the network for the use of their assets. For crypto investors, staking can open up another potential avenue to generating returns.

Crypto piquing your interest? With Crypto trading from SoFi Invest®, you can trade crypto like Ethereum, Bitcoin, Litecoin and more, 24/7 in the SoFi app.

Find out how to invest in crypto with SoFi Invest.



SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).

2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.

3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or pre-qualification for any loan product offered by SoFi Lending Corp and/or its affiliates.
Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.

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Source: sofi.com

How to Improve Your Credit Score to Get a Personal Loan

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Personal loans are an incredible financial tool. They’re speedy, secure, convenient, and best of all, they can be used for just about anything you can think of. Consolidating debt, making improvements to your home, covering unexpected expenses, paying for a special occasion, taking a getaway vacation… the list goes on. 

If you’ve been considering taking out a personal loan, here are a few tips you can use to get a rate you (and your wallet!) will appreciate. Let’s start with a brief overview of some of the personal loan requirements you’ll need to consider before applying.

What is a personal loan and how do I get one?

A personal loan is a lump sum of money you borrow from a lender and pay back in fixed monthly payments – or installments – over a given period of time.

There are a few general criteria involved in qualifying for a personal loan you should understand before submitting your application, but remember – requirements often vary from lender to lender.  

If you’re hoping to qualify for a loan with a low APR, decent credit is a necessity. Generally, a credit score in the 640+ range is good enough to get you approved for a personal loan. With that said, the higher your score, the more likely you’ll be approved for loans with low rates.

Having a low debt-to-income ratio is another crucial requirement to consider when applying for a personal loan. Does your income exceed your debt? If so, by how much? The lower your debt-to-income ratio, the better the chance you have to secure a low-rate personal loan.

Finally, you’ll have to show lenders that you have the means to repay your loan. Proof of income in the form of W-2s, pay stubs, bank statements, or tax returns may be necessary for approval.

Now that you have an idea of what you’ll need to qualify, we’ll share a few tips on how you can score a better APR for your future personal loan. 

What is a debt-to-income ratio and why is it important?

Your debt-to-income (DTI) ratio is a personal finance measure that compares your overall debt to your overall income. Lenders use this ratio to determine a borrower’s ability to manage monthly payments and repay the money they want to borrow from them.

When it comes to getting approved for a low-APR personal loan, the lower your debt-to-income ratio, the better. With a low DTI ratio, you’re much more likely to receive the loan amount you’re looking for at a great rate because lenders can see you’re already doing a fine job managing your current debt.

In other words, a low DTI ratio shows lenders that you don’t spend more money than you can afford to. As you can guess, a higher DTI ratio tells them quite the opposite. From a lender’s perspective, borrowers with high DTI ratios already have too much debt to manage effectively. They won’t be nearly as willing to lend to high-DTI borrowers because they’re unsure if they can handle the additional financial obligation.

Focus on lowering your DTI ratio, and your chances of receiving a better APR are much higher.   

Debt-to-Income Ratio Breakdown

So – what is a good debt-to-income ratio? The Consumer Financial Protection Bureau and other experts agree on three general thresholds to consider:

Tier 1 – 36% or less: If your DTI ratio is 36% or less, you’re likely in a solid financial position and may be a good candidate for a low-APR personal loan.

Tier 2 – Less than 43%: If your DTI ratio is less than 43%, you’re probably in a comfortable financial position at the moment, but it may be time to consider ways you can reduce your debt. You may still be eligible for a personal loan, but the rates could be significantly higher.

Tier 3 – 43% or more: If your DTI ratio is higher than 43%, you may feel like your monthly payments are a bit more than you can comfortably handle. At this level, lenders may assume you have more debt than you can handle and may not approve you for new credit.

Calculating Your DTI Ratio

Knowing your debt-to-income ratio upfront ensures you won’t face any unexpected surprises when you apply for new credit. To calculate yours, simply divide your recurring monthly debt payments (mortgage, credit card minimums, loans, etc.) by your total monthly income. Take a look at the example below:

Monthly Expenses

Car payment: $350

Student loan payment: $150

Mortgage payment: $1,200

Credit card minimum payment: $35

Calculating DTI

Recurring monthly debt = $1,735

Total monthly income: $4,000

DTI ratio calculation: 1735/4000 = 0.43375

Once you complete the calculation, move the decimal point two places to the right and you’ve got your DTI ratio in percentage form. In the example above, the borrower’s DTI ratio would be 43%.

How can I lower my DTI ratio?

Higher DTI ratio than you’d like? To lower your DTI ratio, you have three options: pay down your debt, increase your income, or do both at the same time. Your ratio won’t drop overnight, but if you follow the suggestions below, you could see a significant decrease in your DTI ratio before you know it.

Try these tips to begin lowering your DTI ratio:

  • Pay more than your minimum on monthly debt payments
  • If possible, avoid taking on more debt than you already have
  • Increase your income by taking on a part-time job or finding a profitable side hustle
  • Keep your budget tight and curb any unnecessary spending

While your DTI is just one measure of your financial health, it’s still an important one to pay close attention to – especially when you’re seeking out new credit.

Next, let’s walk through some credit score requirements you’ll want to consider when you’re seeking a low-APR personal loan.  

What credit score do I need to get a personal loan?

Generally, the higher your credit score, the lower APR you’ll qualify for. You’ll typically want a credit score of 640 or above to qualify for a loan, but once again – requirements can vary significantly across lenders. If your credit score is lower than 640, options will likely be available, but they may come with higher interest rates than you’re aiming for. 

To receive an APR that works for you and your budget, you’ll want to prioritize raising your credit score. (You can track your credit score for free in the Mint app)

How can I improve my credit score?

Improving your credit score takes time, effort, and dedication, but the benefits a high credit score can have on your financial health are remarkable. 

To improve your credit score, focus on:

Making payments on time: Your payment history determines an astounding 35% of your credit score, which means making on-time payments is absolutely crucial if you’re working to raise it. A single on-time payment likely won’t improve your score by much, so you’ll have to make consistent on-time payments to see a significant increase.

Paying down credit card debt: Depending on your credit limit, carrying large balances on your credit cards could be negatively impacting your credit score. It all comes down to your credit utilization ratio, or how much credit you’re using compared to how much credit lenders have extended to you. VantageScore experts typically recommend using less than 30% of your available credit to improve your score, but the lower your utilization, the better.

Avoiding opening multiple new accounts: In general, Vantage considers borrowers who open multiple new accounts within a short timeframe to be riskier. So, if you’re applying for many different credit cards and loans at the same time, you could see a drop in your score. To combat this, it’s wise to take some time to research the options that are best for you and your needs before applying.

Note: Opening just one new account could make your score dip slightly. As long as you manage your new credit responsibly, it should bounce back quickly.

Recap

Alright, all that’s left is a brief recap to wrap things up. If you’re looking for a low-rate financial product that could get you the money you need in as little as one business day, here’s what you’ll want to keep in mind:

A high credit score is your friend: The higher your credit score, the more likely you are to be approved for a personal loan with a low APR. To qualify for a personal loan, aim for a credit score of at least 640. If you can get it higher than that, lower rates could be coming your way.

The lower your DTI ratio, the better: A low DTI ratio shows lenders you have a good handle on your debt. Aim for a DTI ratio of 36% or lower to be eligible for the best rates. 

Proof of income may be required: Whether it’s a W-2 form, pay stub, bank statement, or tax return, lenders want to see proof that you’ll be able to pay them back. When it’s time to apply, it’s a good idea to have these documents ready.

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Source: mint.intuit.com

Centralized vs. Decentralized Exchanges: Six Differences to Consider

When it comes to crypto exchanges, there are advantages and disadvantages in both a decentralized vs centralized exchange. Ultimately, the choice an investor makes will likely depend on factors like their trading goals, comfort level with newer technology, and the importance they place on things like security and anonymity.

What Are Centralized and Decentralized Exchanges?

A centralized exchange involves one central entity (e.g. bank, trading platform, government institution, etc.) controlling the operations of the exchange and its wallets for different types of cryptocurrency. This can make things easier for users but can also present all the problems centralization can entail, like a single point of failure.

Decentralized exchanges (DEXs) have no one entity controlling them—instead transactions are made peer-to-peer—and are thought to be more secure because they have no single point of failure (as well as no employees who could steal funds). But these exchanges are still very new and can be more difficult to use, especially for those just learning crypto basics.

Recommended: 2021 Crypto Investing Guide

6 Key Differences Between Centralized and Decentralized Exchanges

Centralized and decentralized cryptocurrency exchanges are different in many ways. These are some of the major differences investors should know about.

1. Usability

One goal of centralized exchange platforms is to make it as easy as possible for new users to get started trading cryptocurrency. By design, creating an account and placing trades can be accomplished in very little time and with little technical expertise.

Decentralized exchanges, on the other hand, can make crypto investing somewhat more complicated. That’s primarily because 100% of the responsibility lies with the user, rather than a third party. If you make a mistake, there may be no way to fix it, whereas centralized exchanges sometimes have safeguards in place for certain user errors.

2. Security

Centralized exchanges, in their quest to make things easier for users, create a single point of failure. If hackers attack this single point with success and obtain private keys that protect users’ accounts, they can compromise the entire exchange and all of its funds. There have been several instances of this happening over the years, with ssers sometimes facing a total loss.

For those reasons, decentralized exchanges are thought to be more secure than centralized ones. Nothing’s ever for certain, and it might still be possible for a DEX to have some kind of bug. But for the most part, user error is a more common threat to DEX users than the exchange being hacked.

3. Fees

Centralized exchanges charge customers fees for their use of the service. Every transaction typically involves a fee and withdrawing coins may also come with a fee. For active traders, these fees may add up to large amounts over time.

Decentralized exchanges often have far fewer fees because they don’t have the same overhead expenses. Some decentralized exchanges don’t even have fees at all.

4. Liquidity

One of the biggest differences between centralized vs. decentralized exchanges is in liquidity.

Centralized exchanges tend to have more liquidity because they have more users, and these users are creating more orders. In-demand assets trade in higher volumes almost without fail. There are also market makers who further increase liquidity.

By contrast, because they typically have fewer users and no central entity organizing their order books, decentralized exchanges have less liquidity. The lack of liquidity in decentralized exchanges could pose problems for investors. For example, an investor may want to buy a particular asset but finds that high demand has led to a sharp rise in price compared to other markets, because other investors have bought up all the sell orders.

Recommended: What are Liquid Assets?

Liquidity and Slippage

Another example of a lack of liquidity causing problems for investors is if they attempt to sell an in-demand asset on a DEX—and end up falling victim to a lot of “slippage.”

Slippage refers to the losses that occur when selling large amounts of an asset, particularly in times of low liquidity. If someone wants to sell 100 tokens, for example, each at a price of $1, there may not be enough buy orders to actually sell them all at a price of $1. There might only be a buy order for 10 tokens at $1, then an order for 10 more at $0.99, 15 at $0.98, and so on. By the time a trader has liquidated their position, they wind up with less money.

Greater liquidity (such as one might find on a centralized exchange) means faster trades and less slippage.

5. Anonymity

Creating an account on a centralized exchange typically involves handing over lots of personal information. These exchanges might require a name, email address, mailing address, or even a selfie of the registrant holding their government-issued ID next to their face. This is typically done to comply with cryptocurrency regulations like know-your-customer (KYC) and anti-money-laundering (AML) laws.

Decentralized exchanges, on the other hand, might not require users to even create an account to get started. Traders can convert their gains into a centralized cryptocurrency like a stablecoin (one of many altcoins) and move those funds off the exchange to another crypto wallet, without needing to link a bank account.

6. Speed

Perhaps one of the most noticeable differences between centralized vs decentralized exchanges from a user’s perspective is the speed at which trades occur. Decentralized exchanges perform much slower than their centralized counterparts.

According to some estimates, trades placed on centralized exchanges take about 10 milliseconds on average to execute orders. That’s as good as happening instantly from the point of view of the person placing the trade.

Decentralized exchanges, however, can take anywhere from 15 to 60 seconds to match and fill an order. For investors who create a lot of buy and sell orders, that can add up to a good deal of sitting around waiting for trades to settle.

What Are the Biggest Advantages of Using a Decentralized Exchange?

The two main benefits of using a decentralized exchange might be increased security and anonymity. Some users prefer to keep their trades private and not have their personal information and wallet balances in the hands of a single entity.

Furthermore, the reduced risk of hacking eases both privacy and security concerns. Not only are funds thought to be safer, but the threat of a user’s info leaking and being used for identity theft or targeting for phishing attacks might be nonexistent, since DEX users might not even have to make an account to get started.

What Are the Biggest Advantages of Using a Centralized Exchange?

Centralized exchanges are easier to use (which may be especially important to those just getting started with crypto), have greater liquidity, and execute trades faster.

The Takeaway

Both centralized and decentralized exchanges have something to offer crypto investors. For investors who value usability, liquidity, and speed, a centralized exchange may be the way to go. For those who prioritize anonymity and security, a decentralized exchange is more likely to appeal.

Decentralized exchanges are a new concept and are still a long way from being widely used. Still, their volume has been rising steadily and could one day outpace that of centralized exchanges, especially as their usability improves.
Interested in buying and selling cryptocurrency? With SoFi Invest® crypto trading, investors can safely trade cryptocurrencies for investment through a single platform.

Find out how SoFi can help you safely invest and store cryptocurrencies.


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Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments.
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The Best Financial Advice I Got From Mom

Everyone knows that Mom is always right. But on Mother’s Day, we could all use a little reminder.

We talked to some of our favorite financial experts about the best money advice they ever received from their moms – and how you can apply that wisdom to your own life.

Why You Should Wait Before Buying Something

When CFP Nate Nieri of Modern Money Management was little he saved up enough money to buy a video game. He asked his mom for a ride to the store to buy it, but she would only take him if he waited two weeks to make sure he really wanted it. As his mom predicted, he changed his mind before the time had passed.

“It was a very valuable lesson on impulse purchasing and patience, and something that has really stuck with me,” he said.

How to apply it: A general rule of thumb is to wait at least 24 hours before buying something or a week if the item is particularly expensive. Add it to your wish list or a special folder on your browser and walk away. Chances are, you’ll forget about the item – and if you don’t, it might actually be worth buying.

Plan Your Meals Early

Mindy Jensen, host of the “BiggerPockets Money Podcast,” said her mom told her, “Always know what you’re having for dinner by 8 a.m.”

Jensen got this advice when she was a stay-at-home mom and would forget to plan dinner until late in the day. Usually, this meant getting take-out or going to a restaurant.

How to apply it: The advice rings true, whether you’re cooking for a family or just yourself. If you can plan dinner first thing in the morning, you won’t be tempted to get DoorDash at 6 p.m. Starting in the morning gives you enough time to defrost something, throw a chicken breast in the slow cooker or run to the grocery store for ingredients.

Set Specific Savings Goals

Ricardo Pina of The Modest Wallet said his mom always told him to save for a particular item, instead of stashing money away just because it’s the responsible thing to do.

“Whether we were saving money to buy a new video game or a brand new bike, she used to say that when you have a savings goal, saving becomes so much more enjoyable,” he said.

How to apply it: Set up a savings goal in Mint. Every time you transfer money into your account named “Italy trip,” for instance, you’ll remember why you’re saving in the first place.

If you’re saving for retirement, get a clear picture of what kind of retirement you want. Whether it’s living in a Tahoe cabin or a Florida beachfront condo, a more specific image will make it easier to save.

Start Saving Early

Marcus Garrett, author of “Debt Free or Die Trying,” said his mother encouraged him to start saving early by taking him to open a savings account at age 16. When he got his first job at a movie theater, she agreed to match whatever he saved toward his first car.

“By age 16, I already saw and understood the value of an ‘employee match,’” he said.

How to apply it: If you have access to an employer-sponsored retirement plan, you may receive a company match. This means the company will contribute money to your retirement account, usually up to a certain amount. Always contribute enough to earn the full company match, because it’s essentially free money.

If you’re a parent, you can also utilize this strategy with your own kids by matching every dollar they save. It will encourage them to save more, because every dollar they put away will be doubled.

Don’t Rely on Future Earnings

Jacob Wade of I Heart Budgets said his mother-in-law gave him some crucial advice when he and his wife first got married: always live on last month’s income.

“That changed everything for us and helped us avoid day-to-day financial stress,” he said.

It took him and his wife six months to save up a full month’s income, but it’s been worth it. Even 13 years later, they still live on last month’s earnings.

How to apply it: Having a month’s worth of income in the bank means you won’t have to wait for payday to afford your bills. If you’re self-employed, this is especially important because clients can pay late. If you have enough money in your checking account, you won’t have to dip into your savings to make rent.

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Source: mint.intuit.com