Investing in Bitcoin is accompanied by high risks, especially if you are a beginner. Novice investors tend to follow instant impulses that cause them to buy a cryptocurrency at a time when its rate has grown sufficiently. Therefore, newcomers are often exposed to great risks and lose money when the rate goes down.
Looking at a prolonged drop, newcomers tend to lose patience and sell cryptocurrency at a low price, fixing losses. It often happens that after this, the rate starts to rise suddenly. This may continue for several cycles in a row, until the crypto investor either accepts the losses, or changes its tactics, waiting for the right moment to buy and sell bitcoin.
But even if you bought a cryptocurrency low, this does not guarantee that its rate will not correct even more, and you will save your funds. In today’s article, we will tell you about a few simple life hacks that will help you earn on bitcoin investments and save your money even if the price of the cryptocurrency starts to fall.
Get a crypto loan
Today, there are many services that allow you to take out a loan secured by cryptocurrency: Nexo, Compound, Aave, and many others. At first glance, this method may seem unprofitable, since the borrower will have to pay interest. But in fact, cryptocurrencies are different from traditional lending. And here’s why:
- You don’t need to submit documents and get approval. The loan is issued automatically after you deposit the cryptocurrency as collateral;
- Interest on cryptocurrencies is several times lower: in practice, they rarely exceed 8% per annum. And DeFi – lending platforms provide even cheaper loans, which are below 1% per year;
- No one controls delinquencies and there is no need to make monthly payments during the entire loan term. And if at the end of the term you do not pay the loan, the collateral will simply be debited, and there will be no problems.
Now let’s see what benefits an investor can get from this. Everything is very simple: at the end of the loan term, you pay a fixed amount in the currency plus interest. Consider two different situations.
Case one: the price of cryptocurrency by the end of the term increased by 30%
Let’s say you took out a 1 BTC crypto loan (~$11,500 at the exchange rate at the time of writing) at 8% per annum. At the end of the term, you will need to return $11 500 + $920 = $12 420. But, since the price of bitcoin has increased by 30%, the cost of your collateral will be $14,950. Your profit will be $ 2,500. To cover the cost of interest, it is enough for Bitcoin to grow by more than 8% or $920.
Case two: the price of the cryptocurrency has decreased by 30 by the end of the term%
And this case is the most interesting one. If you just buy 1 BTC and store it in a crypto wallet, you will lose 30% of your investments, i.e. $3,450, and the value of your portfolio will decrease to $8,050. Agree, this scenario is unlikely to please you?
But if you take a fixed-amount crypto loan, the funds will be partially safe. In this case, you can simply not pay the loan: your collateral will “burn”, and you will only suffer losses by paying interest – 8% or $920. Then you will have $10,580 left on your hands – $2,530 more than if you kept Bitcoin just in your wallet.
Summary
Of course, if you get a crypto loan, then if Bitcoin grows, your profit will be lower. And if the Bitcoin exchange rate does not grow by more than 8% during the loan period, then you will not make a profit at all. However, crypto loan insures your assets in case the price will be significantly reduced.
Use arbitration
Crypto-arbitrage is the purchase of cryptocurrencies on one platform and the sale of them on another in order to make a profit. Such arbitration is also called inter-exchange arbitration. Thanks to this method, you can sell the cryptocurrency more expensive immediately after its purchase, without waiting for the moment when the Bitcoin exchange rate will rise.
On many platforms, the exchange rate of cryptocurrencies may differ by 5% or more, which allows you to earn on inter-exchange arbitration. However, it will be difficult for beginners to implement this method manually for a number of reasons:
- It is necessary to constantly monitor dozens of sites and look for suitable arbitrage opportunities. Of course, it will not be difficult to find special screeners on the Internet that display the rates of various crypto exchanges on the same screen. But this will not save you from having to constantly sit in front of the monitor screen and monitor the courses.
- You need to take fees into account. You need to calculate the profit taking into account the costs of exchange and withdrawal. Conditions may change due to various factors, and this will also have to be constantly monitored.
- You will compete with bots. As soon as the arbitration window appears, bots will be the first to react. They will always be ahead of you, because they act automatically, and they take milliseconds to complete operations.
In addition, if you independently transfer cryptocurrency from exchange to exchange, it can take a long time, during which the price of the crypto asset can change significantly, leveling all the benefits, and even lead to losses. Exchange and withdrawal fees should also be taken into account.
What to do?
There are various services that, thanks to arbitrage, allow users to sell bitcoin at a higher rate than on many popular exchanges. Thus, the platforms do not bear the cost of fees when exchanging bitcoins through crypto-fiat gateways.
HiRiBi is one of such services (https://hiribi.com/). You can use it to exchange bitcoin for PayPal dollars and get a profit at the same time. For example, you bought 1 BTC at the rate of $11,500. On HiRiBi, you will sell Bitcoin for $12,315, and your profit will be $815 or 7% of the transaction amount.
Hiribi exchange monitors 20 major crypto exchanges, which allows users to earn money on arbitration, saving them from having to do all the work manually. The sale rate depends on exchange rates: the greater the difference between bitcoin prices, the more profit you can get by exchanging BTC for PayPal. Therefore, the profit from the sale of Bitcoin can reach even 10%!
PayPal is the only payment system supported by the service. This year, the payment system said it would target cryptocurrency users and even partnered with the Paxos platform to integrate crypto exchange solutions. Therefore, if you want to sell bitcoin more expensive and reduce losses in case its rate collapses, then use the HiRiBi exchanger (https://hiribi.com/).
Summary
The service will provide some insurance, so you don’t have to worry too much about your savings if you invest in Bitcoin. If the exchange rate drops by 5% – 10%, you can simply exchange Bitcoin using HiRiBi and break even. And if the price increases, your profit will grow even more.
Bonus: provide loans to other users
There are p2p lending platforms where holders provide cryptocurrencies to other users directly. At the same time, the platforms themselves act as guarantors of transaction security. Some crypto exchanges, such as Binance and Poloniex, also provide this feature. The main difference is that exchange-traded crypto loans can only be used by traders on the platforms themselves, but interest is accrued daily, which increases the yield due to a complex percentage.
Thanks to P2P lending, your coins will not be a dead weight in your wallet, but will begin to generate passive income. And you can also combine several methods that we wrote about in the article. Let’s calculate how much income you could get from lending, if the bitcoin exchange rate does not change in a year, and you sell it using the HiRiBi service (https://hiribi.com/).
Let’s say you provided 1 BTC on credit to other users at 5% per annum. Then your profit will be 0.05 BTC. Then you sell Bitcoin through HiRiBi at the rate of $12,315 and eventually get $12,930. $1,430 is your profit, which is about 12.4% of the initial investment. This way you will save money, even if the price of bitcoin falls by 12% over the year.
Here are some simple cryptolife hacks that will help you save money and increase profits in the event of a rise in the bitcoin exchange rate. Of course, these methods will not save you completely from losses, but they will significantly reduce the risks when investing in cryptocurrencies.
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