Why people who have crypto borrow crypto — where is the catch?
I will share now what I am doing on CEFI, beside simple earning interest by holding coins there.
I am sure that most of users, new and even old ones, are not doing crypto borrowing at all, using their collateral, or at least not the way I will explain to all of you now. If you know what you are doing, it is highly profitable and fairly easy.
You need first to select coin that you hold and for which you are VERY POSITIVE that it will raise in price at least double in next 365 days. It is not so hard, in current times, most of Top 100 CMC coins did it, and not only 2x but much more.
You do not need to hold that coin currently, but if you are bullish about it and have funds — just buy it!
All good CEFI platforms I mentioned above do crypto borrowing based on crypto collateral. But there are some differences between platforms that you must consider before you start. Most important is that coin you are bullish for is available for borrowing. Also, that APR% rate is not so high. Plus, that you can take stable coin as loan based on your bullish crypto coin as collateral. And of course — NO HIDDEN FEES!
Considering all this, Blockfi is OUT, they support only BTC, ETH, LTC and PAXG as collateral, they have “Origination Fee” 2% and their APR is high — 9.75% for LTV 50%
Crypto com is little better, but again, small amount of coins they accept as collateral — CRO, BTC, ETH, XRP, LTC, XLM and EOS for which they offer loans in PAX, TUSD, USDC and USDT. If you stake 25000 or more CRO, APR is 8%, if not then very high 12%
Celsius network is much better than previous two mentioned — they support above 25 coins as collateral, and they offer TUSD, GUSD, PAX, USDC, DAI and USDT as loans. The problem is only that their borrowing is not available 24/7 , many times it gives application error or it is simply not available. Their APR is 7.95% for LTV 50% and 3.95% for LTV33%, if you apply for stablecoin loan. If you would like loan in their own CEL token — then it is lover — 5.67% and 2.77%.
Apyharvest.com is what I use, since they support 50 coins as collateral and you can take loan in any of coins they support, including stablecoins. Their APR is 5% for LTV 50% and 2.5% for LTV 33%.
As you all probably know, LTV 50% means that you need to put for example 2 ETH to get 1 ETH loan, and LTV 33% means that you have to put 3 ETH to get 1 ETH loan.
Now back to what I do and how I made nice profit with this all…
I will give you best tutorial just by stating my 2 currently active loans with apyharvest:
By end of November, I was (and I am still) pretty bullish on THETA and XMR. I believe both will double if not triple their price in next 3–6 months, and I am like 99% sure that they will go 2x in next 365 days.
So I take this 2 loans which are still active:
On 28.11.2020. I put 50000 THETA as collateral, on 1 Year term, LTV 33% and APR 2.5%. At that moment price of THETA was 0.612 USDC. So, my total collateral was around 30600 USDC. For that I got 10186 USDC loan, in less than 8 hours. The reason why I did not get exact 1/3 of my collateral is simple price change for THETA in those 8 hours. There was no originating fee, no transaction (gas) fee, no processing fee etc. For those 10186 USDC I manage to buy additional 16652.3 THETA. Now I seat and wait my desired price ( I go double — so 1.25 USDC per THETA) . When it reaches that price, I will settle my loan in FULL (need to pay just days passed from start of loan — no penalties) and by my calculation I should earn NET around 10500 USDC
On 02.12.2020. I put 300 XMR as collateral, on 1 Year term, LTV 50% and APR 5%. At that moment price of XMR was 126.17 USDC. For that I got 18892.74 USDC loan, in less than 10 hours. For those 18892.74 USDC I manage to buy additional 149.12 XMR same day. Now I seat and wait my desired price of 253 USDC per XMR . When it reaches that price, I will settle my loan in FULL and by my calculation I should earn NET around 18500 USDC
In next table you will see my progress in all this from March 2020, when market was down and I was certain that it will all recover.
Hope you all find this text informative.
