Putting your BTC Holdings to work on their way to the moon

by Jan 19, 2021Blog0 comments

Bitcoin’s on its way to 100k. The question isn’t if but when. So, on it’s way, you probably don’t want to sell off your BTC, but you need some cash. Enjoy those profits, you intrepid opportunity queen! Perhaps you’ve considered getting personal loans but the interest rates are too high. Have you considered lenders that allow you to borrow against your crypto?

Private lenders are a good place to start. Generally they give you interest bearing accounts (IBA) to hold your crypto. The IBA rates are around 6% for BTC (with similar rates for LTC and ETH, and perhaps a handful of other alts.) Even if you don’t want a loan, it’s a good idea to use IBAs to get a return on your crypto to both soften downturns and heighten bull markets. What you’re doing under the hood is offering these companies liquidity to lend to other retail and institutional customers. Private lenders include BlockFi, Celsius, and Nexo, all of which have IBAs, allow you to borrow stablecoins and/or cash, and in general have a good track record of getting returns for their customers. The interest rates are also less dynamically based on available liquidity, so you can rest assured that the 8% borrow APR will last more than a few blocks.

Exchanges have started offering crypto backed loans. At the time of this writing, Coinbase offers up to 30% of the value of your BTC, with an APR of 8%. Only the value of a single payment is seized if BTC falls by 50%, making this a rather appealing option for those looking for a small loans in a one stop shop, easily allowing you to protect your assets by buying more BTC.

If you’re more savvy, and if ETH is more your speed, then DeFi is the second stop on our borrowing tour. DeFi accounts have similar IBAs, but the platforms are based on public smart contracts. Compound, Aave, along with several others have made this the backbone of their platforms. You’ll need to be careful borrowing though, because if your collateral falls too much, anyone with a computer can seize your crypto; during high network traffic, your rates can shoot up. Ethereum gas prices, difficulty of managing your own wallets, and a high floor of crypto expertise required to make sense of the products make this an exclusive, profitable, but somewhat error prone club to join. 

If you’re looking for cash for home repairs, a shopping spree, or even just buying more crypto (lever up folks), there are options for every type of customer. Have fun, only spend what you’re comfortable losing, and soon enough, you’ll have a Crypto Credit Score to open up even more crypto borrowing and lending options!

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