How to Secure Crypto Earnings with Bonds: A Guide for Investors

If we look at the list of investments we can go into, we can name them as crypto trading, stock market, gold, jewelry, real estate, and even bonds. 

• And among these listed investment assets, we know that investing in cryptocurrencies is considered high-risk because of the market’s volatility. 
• It is true that it can be easy to earn +40% in a crypto portfolio. But remember, not every day is Christmas. There are red days, where you can also experience a -40% downturn. 

When earning from crypto trading, diversification of profits is a brilliant way to secure them. 

• It is through converting the profits into other investment assets, like Bonds, which offer a secure interest rate. 

What’s the Significance? This article seeks to explain to readers why securing crypto profits through bonds is a viable option, and how to convert crypto earnings into bonds using the PDAX. 

Note: This is a series of beginner’s guide on how to invest using the PDAX platform. 

• A Beginner’s Guide to Investment Profiling – What Kind of Investor Are You? 
• Beginners Guide to Peso Cost Averaging
• Beginners Guide: Bonds vs. Neobanks: A Comparison of Interest Rates
• How to Invest in Tokenized Bonds with PDAX: A Comprehensive Guide

This article is in collaboration with PDAX. Make your next money move with PDAX by signing up here!

Understanding Bonds as a Safe Investment

What Are Bonds?

• A bond is a security where the investor will lend money to the borrower, and after a set date, the borrower must pay the lender with a fixed interest.
• For instance, Michael Lance bought a bond from a traditional bank for ₱10,000. The maturity date is 6% yield for three months. After the maturity date, his investment becomes ₱10,600. 
• We can treat bonds as tokens; the borrower will release a token while the lender will buy that token from a financial institution, giving the borrower no direct communication, or even a notarized contract, with the lender. 
• There are two entities that offer bonds: a corporation and a government. 

Government-Issued Bonds

• Bonds offered by the Philippine Government, issued by the Bureau of Treasury (BTr) are called Treasury Bonds, or t-bonds. 
• T-bonds have short maturity dates, either 91, 182, or 364 days.
• Meanwhile, there is what we call a “Retail Treasury Bond” (RTB), which is just the retail version of t-bonds. RTBs typically have a longer maturity period, ranging from a few years to even more than a decade. 
• T-bonds and RTBs are used by the national government to fund the executive department’s projects and programs.

Bonds on PDAX

• PDAX offers t-bonds and RTBs. But these bonds are tokenized.
  • This means that users can invest in bonds minted on the blockchain. 
• Tokenizing bonds produces better security and ease of use. 
• The minimum amount of tokenized T-bonds that users can buy on PDAX is ₱500 while the minimum amount of tokenized RTBs is ₱5,000.
• PDAX received the green light to offer tokenized bonds before 2023 ended. 
• Worth Reading: Philippines Introduces Blockchain Tokenized Treasury Bonds via PDAX

Why Bonds Are Considered Low-Risk

• Versus Crypto Trading: Unlike crypto, which is volatile, bonds are stable.
  • This means that whatever happens, the interest rate remains the same throughout the investment period. 
• Disadvantage: However, it should be noted that since it is stable, it offers less earning opportunities compared to crypto.
  • Remember the phrase, “low risk, low reward”?
• Security: The fact that what PDAX offers are bonds issued by the government means that these investments are secured. If fraud happens, bad actors can be detected.
  • The fact that these bonds are tokenized also brings an additional security layer, as it utilizes the benefits of blockchain technology.
• For Whom? Thus, it is safe to say that bonds are for low-appetite investors or stable investment plans.
  • For instance, you want to grow your money. However, you know that you will use that fund for your child’s seventh birthday 365 days from now, so you cannot afford to lose even 10% of it. 
  • Then t-bonds on PDAX is a good investment opportunity, as your funds will gain interest after your target date. 

Why Crypto Earners Should Consider Bonds

• I am sharing this from my own experience. In January 2023, I bought ‌₱1,000-worth of crypto. A few months later, my portfolio was already +40%, and I decided to withdraw it.
  • Long story short, I got FUD that the market might crash and I cannot afford to lose my earnings anymore. 
  • Thus, I invested it in a stable asset, which has a fixed interest rate, since I am not going to use the funds yet for spending. 
• If you gain a profit so much that you cannot afford to lose it anymore, then it is a good idea to withdraw and re-invest in a stable asset.
  • The crypto market is too volatile; it can crash, and your profits will blow away, so investing in stable investment assets is a must. 

How to Purchase Bonds on PDAX

Create an Account

• Create and verify a PDAX account, at least level 2. 
• Within the home page, click the Bonds icon or click the “Create Bonds Account” link on the Portfolio page.
• Read and accept the Legal Agreements ‌shown.
• Submit the additional KYC Information, including the SSS or GSIS number, TIN number, and mobile number.
• Review and submit the application. Note that the information submitted can never be edited once the application has been submitted.  

Purchase Bonds

• Within the home page, click the Bonds icon. 
• Go to the “Trade” feature in the Bonds section. 
• Choose the available bonds that will be invested in.
• Type the desired amount. 
• Confirm the transaction. 

Dates to Remember

• Offer Period: The only dates that the bond will be available on PDAX.
• Award Date: The investor will be informed via email whether the investment is fully, partially, or not awarded, along with their corresponding amount.
  • According to PDAX, the decision on whether the investor will be granted an award depends on what the BTr will issue to bonds.ph Inc. 
• Issue Date: The date when the bond orders are issued to the investor. It happens two business days after the awarded date.
• Maturity Date: The date when the bond reaches its maturity. The investor will receive their credit upon maturity, which includes the bond face value, or the investment fund, along with the interest earned.

Maximizing Returns and Security

Strategies for Crypto Investors

• Learning how to diversify a financial portfolio plays a crucial role in how we can earn more or at least minimize burning our funds.
  • If the crypto market bloods red and you have bonds, at least you are assured that you can still earn despite your cryptocurrencies’ fiat value is going down. 
• When the time comes that you know that your crypto investments are already ripe and are ready to be withdrawn, if you will not use your funds yet, try to re-invest them in bonds, where a secured interest rate is assured. 
• The process is easy, sell your tokens on PDAX, and buy bonds on PDAX—no need to go out of the platform, no need to connect web3 wallets, there will be less friction. 

Taxation and Fees

• However, it should be noted that bonds are subject to 20% income tax. 
• For instance, if you earn ₱600 yield from bond investments, there will be a deduction of ₱120 income tax. 

Overall

Indeed, putting your crypto profits into bonds is a brilliant way to save the funds you cannot afford to lose. 

• It has a fixed interest rate, so you are assured that you will not burn your funds. 
• It is issued by the government, so you are assured that your funds are secured. 
• It is minted on the blockchain, so you are assured that your funds and transactions are more secure. 

If you are earning from crypto that you know you cannot afford to lose anymore, reinvesting your profit in bonds is a good move.

• And PDAX makes it better, allowing users to buy and sell crypto and bonds on just a single platform. 

Secure your crypto profits today through tokenized government-issued bonds on PDAX! 

This article is published on BitPinas: How to Secure Crypto Earnings with Bonds: A Guide for Investors