Using Crypto Collateral Loans to Increase your Market Exposure & Gains

Photo by Austin Distel on Unsplash

I have never been one to look to loans as a way to gain leverage on a position, particularly one that is long term. In saying that, the likelihood that bitcoin or the crypto market in general will rise over the next couple of years is a good bet and there’s a solid chance that having the assets now to ride the wave will pay off in the long run.

But why take out a Crypto Collateral Loan over your Average Loan?

There is nothing wrong with your typical bank loan if you are able to find something generous. There are a few banks who offer reasonable interest rates although often you will need both a high credit score and disposable income. These things aren’t easy to obtain and depending on the bank, the interest rates vary.

This is why many turn to asset or crypto backed loans. They aren’t a new concept, however, since the cryptocurrency space has developed, they have come to provide a good opportunity for retail investors to leverage their initial position. Not only are you able to take out a loan without a credit check or motive, but you are able to receive a super low interest rate due to the fact your asset acts as collateral.

Trustworthy Lenders

YouHodler - Keep Crypto. Use Cash.

1. YouHodler

YouHodler has become an infamous platform for generating interest on your crypto assets. Since their initial launch, they’ve brought out multiple new products to allow investors to use leverage to their advantage. Most allow you the opportunity to use your assets as collateral to gain more exposure to the market.

Collateral Crypto Loans — Use the TOP 20 coins as collateral for crypto loans with the highest loan to value ratio (90%). Get loans in EUR, USD, CHF and GBP and withdraw instantly to credit card and personal banks.

Multi Hodl — An efficient and innovative tool powered by crypto-backed loans to help you capitalize on market volatility.

TurboCharge — Clone your collateral and benefit in case of further price growth! Turbocharge is based on the “cascade of loans” principle.

Nexo - Banking on Crypto

2. Nexo

Nexo is fundamentally banking for crypto. It’s new and offers everything a long term crypto investor would want: compounding interest on your crypto. Nexo also offers a credit line that totals 50% of your assets that you bank with them. For example, $10k worth of bitcoin held within your account will allow you a credit line of $5k that uses your bitcoin as collateral. Their interest is surprisingly low starting from 5.9% APR and there are no minimum repayments.

How Crypto backed Loans allow you to gain Leverage

A lot of advisors within the space recommend the dollar cost averaging approach which means consistently investing small to medium amounts over a long period of time. This lowers risk and allows investors to worry less about point of entry. I think it’s still one of the best long term investing strategies there is, however, despite its minimisation of risk, it can’t be said it is the best method for achieving maximum profit.

The idea of investing a larger principal upfront is always risky no matter what industry let alone the volatile crypto market. Although it must be noted, that the crypto market is new and booming. The Market cap is on the rise and has for the last 3 years. Here is a scenario where a crypto backed loan might provide better returns:

For someone who dollar cost averages, if they were to invest $200 every fortnight into bitcoin and the price of it were to keep increasing, they would find themselves purchasing less and less bitcoin each month.

On the other hand, in a bull market situation like this, for someone to have the ability to take out a crypto backed loan of $10,000 would mean their portfolio gains more exposure to the market as they are able to own the asset, riding up the price of bitcoin, whilst paying off their loan in small payments that incur only a small interest. The end goal hopefully having paid a lot less for their bitcoin.

Whilst they are not for everyone and debt is frowned upon in a lot of instance, they do provide many opportunities for investors looking to take risks. The best way to manage this risk of course is always by doing your own research and deciding whether they are the right option for you.

--

--

--

Australian. Footballer. Crypto Investor.

Love podcasts or audiobooks? Learn on the go with our new app.

Recommended from Medium

The Industry Network

“Markets — Unheard Gossips” — Issue #7

The Anti- Taxation Declaration For Decentralized Crypto Currency.

Crypto 101: Can Cryptocurrency be Legal and Secure?

Guide: Buying Put Options with Pods

N1CE Listed on Coinsbit Exchange

ARC’s Blockchain Bifrost

Aave($AAVE)

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
Crypto Boy

Crypto Boy

Australian. Footballer. Crypto Investor.

More from Medium

On poking the bear —  market

How ONE’s trading experience just got easier?

Reinventing the Wheel: Advanced Order Types for Decentralized AMMs

Bitcoin Heading to 10K?! A Lazy Trader’s Speculation