Borrowing Against Assets Including Crypto

in LeoFinance3 years ago

I think a lot of us have already mentally added this into our strategy for this cycle but it is likely going to make a lot more sense to borrow against our digital assets rather than sell out of them completely.

The major risk if you borrowed against your crypto is that it can lose 80%-99% of its value in the bear market. That is why part of my strategy involves being in stablecoins.

I have played around with Venus on the Binance Smart Chain and if you set your Loan To Value ratio low enough you are still making a net gain all while borrowing against the assets.

One of the reasons I think this bear market will be far worse than we saw last time is because there is so much leveraging going on compared to last time.

We will literally have people doing credit card convenience checks to get money into the system and then they will get on some platform that allows them to do 10X or 100X leverage.

We also have these platforms that allow us to borrow against our assets whether that is stuff like BlockFi, Nexo, Crypto.com or a decentralized method like Compound or Venus. A person could leverage out and then be making gains off of that borrowed asset.

So how does the tide go out this time? In general crypto will go up like a rocket and come down like a guillotine. When big companies start to sell their Bitcoin the market will turn the other way and the liquidations will create a domino effect. Add panic selling and some FUD to the mix and it could get pretty devistating.

I would say any loan threshold needs to be pretty low through this next bear market or your entire like could get liquidated if you don't play it right.

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This guy is really on to something and I’m way above year 1 already so if even if this trend goes up by half of what his saying I’m basically ready to retire

Yeah with the inflation of money it sort of makes sense to just ride the appreciation of these hard assets.

There are families around here that essentially never sell their properties. They just sort of hand them down to the next generation. Similar concept in some respects.

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Why would big companies start selling their reserves in crypto and crash the market?

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To pay off debts or move into other assets that don't seem as over heated. Some companies could really be pretty leveraged out through this whole pandemic situation. Maybe they sell the Bitcoin to pay off their PPP loans or other loans they had to take out. Who knows. When the chart is going straight up at some point it makes sense to take profits and move into another asset that hasn't made its run yet.

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I wish I could see through a crystal ball about the future time line!! Quite scary!

Hi @brianphobos, it seems too risky to invest in these times, will have to be well informed to venture.

Happy day.

That depends on your definition of risk, if you're just going to sell and pay the tax you run the risk of being in the worst performing asset class of the last 40 years