Money over time: Why your financial decision today will define your earnings tomorrow

When you invest in cryptocurrencies, you constantly face the same question: should I hold this now or wait longer? Although it may seem like a simple personal preference, there is a very concrete financial principle behind this decision that can make you gain or lose money. It's called time value of money, and if you understand how it works, you will be able to make much smarter investment decisions.

Why is today's money worth more than tomorrow's money?

The premise is simple yet powerful: an amount of money in your pocket today is more valuable than the same amount you will receive in the future. Why? Because today you can invest that money and generate profits while you wait.

Imagine that a friend owes you 1,000 USD. He offers you two options: receive it today or wait 12 months for him to return it without you having to go pick it up. At first glance, both options seem the same: 1,000 USD. But under the principle of time value of money, they are not.

If you receive the 1,000 USD today, you could do several things with them:

• Deposit them into a savings account with interest
• Invest in crypto with staking and generate returns
• Use that money to create a business opportunity

On the other hand, if you wait 12 months, you lose all those opportunities. Moreover, inflation will have eroded the purchasing power of your money. What cost 1,000 USD a year ago probably costs more today. That's why your friend should pay you more than 1,000 USD for the wait to be worthwhile.

Calculating what your money is really worth: Present vs. Future

To make smart financial decisions, we need to measure two key concepts: present value and future value.

Future value is what your money will be worth at a certain time if you invest it at a given rate of return. Present value is the opposite: how much a certain amount of money that you will receive in the future is worth today.

Let's go back to your friend's example. Suppose you have access to an investment opportunity that offers you a 2% annual return. If you receive 1,000 USD today and invest that money for a year, your future value would be:

FV = $1,000 × 1.02 = $1,020

If your friend's journey lasts two years, the future value would be calculated like this:

FV = $1,000 × (1.02)² = $1,040.40

This demonstrates the power of compounding. Over time, your earnings generate more earnings.

Now, imagine your friend tells you: “I won't give you 1,000 USD in a year. I'll give you 1,030 USD.” Is it a good deal? You can calculate it using the present value. With the same rate of 2%:

PV = $1,030 ÷ 1.02 = $1,009.80

The result tells you that the 1,030 USD you will receive in a year is equivalent to 1,009.80 USD today. That is, you are earning an extra 9.80 USD for waiting. In this case, it would indeed be worth waiting.

How Composition Amplifies Your Gains

Here is the secret that professional investors understand: compounding is like a snowball that grows as it rolls downhill. What starts as a small amount of money can turn into something much larger just thanks to interest.

In the previous examples, we calculated the composition just once a year. But if you have the opportunity to apply it more frequently (every quarter, every month, even daily), the effect is exponentially greater.

Let's take the same 1,000 USD at 2% per year, but now with quarterly compounding:

FV = $1,000 × ( + 0.02÷4)^(×4) = $1,020.15

The difference of 15 cents seems insignificant. But multiply this by larger amounts and longer periods: with 100,000 USD invested over 10 years, that small difference turns into thousands of extra dollars.

Inflation: The Silent Enemy of Your Money

A return of 2% per year sounds good, right? Until you find out that inflation is at 3% per year. Suddenly, your money is losing purchasing power even though it seems to be gaining.

Inflation reduces the real value of your money. What you could buy with 100 USD a year ago now requires 103 USD today. That's why investors need to choose opportunities where the return exceeds inflation. Otherwise, they will be losing money in real terms.

The challenge is that inflation is difficult to predict. There are multiple indices to measure it, and each one offers different figures. Therefore, when making long-term investment decisions, it is wise to consider a margin of safety that takes possible inflationary surprises into account.

Applying this to your crypto strategy

All this analysis of the value of money over time is not just academic theory. It has very practical applications in the world of cryptocurrencies.

Staking blocked vs. holding without generating

A common decision is whether you should stake your ether (ETH) for 6 months at a yield of 2%, or keep it in your wallet without generating anything. Using the time value of money, you should stake it, because you are generating capital gains that would otherwise be idle.

But this is where it gets complicated: what if you find another staking opportunity that offers 5% annually? Then your original decision turns out to be the wrong one. That's why it's worth comparing opportunities using these simple calculations.

When to buy bitcoin?

Suppose you have 50 USD to invest in bitcoin (BTC). The question is: should I buy today or wait for my next paycheck to buy next month with another 50 USD?

Under the principle of the time value of money, you should buy today. Your investment will start generating potential profits immediately. Furthermore, if the price rises during that month, you will have taken advantage of an earlier entry.

Of course, the reality is more complex because the price of BTC is volatile. But the underlying principle remains valid: the sooner you invest, the more time your money will have to grow.

The general formula you need

For any calculation of time value of money, these are the fundamental formulas:

Future Value: FV = I × (1 + r)^n

Where I is your initial investment, r is the rate of return, and n is the number of periods.

Present Value: PV = FV ÷ (1 + r)^n

Both are interchangeable. If you know one, you can calculate the other. This is the magic of the time value of money.

Why this matters for your wallet

Although it sounds complicated, you are probably already using these principles instinctively. Every time you ask yourself the question “Should I keep this now or wait?”, you are thinking in terms of present and future value.

The difference is that professional investors, large companies, and lenders formalize these calculations. For them, a fraction of a percentage in difference can mean millions in profits.

As a cryptocurrency investor, you should do the same. Before choosing where to invest your money, ask yourself these questions:

• How much could my investment be worth in the future with different performance options?
• What is the present value of the earnings they promise in the future?
• Does the proposed yield exceed inflation?
• Are there alternative opportunities that offer me better value?

Understanding the value of money over time not only makes you a more informed investor. It turns you into someone capable of objectively evaluating opportunities and making decisions that truly maximize your returns. And in crypto, where opportunities arise constantly, that is an invaluable skill.