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Advice on crypto loans

A

asaud

Mentor Group Gold Premium
Sep 21, 2024
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Earth
#1
Hello, i am holding BTC with 68k USD average net cost. i will hold it till i get a profit but i am bothered by the btc sits by itself.

So i am thinking to borrow something like 400k usdt by showing btc as collateral and cashing out it to buy a property as investment. (i also hold enough usdt to pay the loan anyway)

But i dont know where to start. i dont even know if its good idea tho, i am just wanting to make a some profit while my btc's are sitting so i am also open to any other idea.

You will say you hold that much btc but you dont know what to do; well yes.. if i am not financially idiot my average net cost wouldnt be 68k usd anyway

Thanks
 
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#5
I understand your temptation but using your BTC as collateral can really hurt you if you just send it to the counter party and in general I think it has negative equity (obviously depending on my personal risk assessment...)
 
#6
asaud said:
also open to any other idea.
Click to expand...
Personally I would never lend out BTC given how valuable it will be in the future. The risk vs reward doesn't make sense.

But I did see this on chainflip the other day, not sure how long it will last. NFA and DYOR of course.
 

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  • btc.webp
    btc.webp
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#10
#11
Any time you transfer your BTC to a third party you are taking a counterparty risk that they'll be hacked, crash or run off with your money.

If I was going to go down this route I'd probably look at a big decentralised platform, something like AAVE, which has around $9bn in assets on the platform, including $2.4bn in WBTC. You wrap your BTC (risk), transfer to ETH (risk), deposit on Aave (risk) and borrow USDT (risk). You then send your USDT to your favourite exchange and cash out. Then hope and pray that BTC price doesn't crash below the risk threshold and liquidate you.
 
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#12
asaud said:
Well i prefer dex.
Click to expand...
To do this in a more decentralized manner first you need to mint or convert the native BTC to one of the following:
- WBTC
-cbBTC (this is new and you need a coinbase account to go direct BTC ---> CBBTC)
-TBTC (relatively new but the most decentralized)

To mint TBTC you can go to https://dashboard.threshold.network/tBTC/mint
Then you could either use TBTC as the loan collateral (on protocols that support it) or swap it for CBBTC/WBTC on a DEX.

If you don't want to mint you could swap the BTC to ETH on chainflip or thorswap and then buy whichever one you want on a DEX but you might pay more in fees (and spread) this way.

Next head over to Defilama to see what the top lending protocols are(sort by TVL): https://defillama.com/protocols/Lending

Aave leads with 12 billion USD total value locked:

Lending protocols.webp


I've heard good things about fluid so lets take a look: https://fluid.instadapp.io/vaults/1/22/strategies/deposit-borrow
You can click on "simulation mode" in top right to play around.

Below we can see the borrow interest rate for USDT is 6.17% and to borrow 400k USDT you could use 15 WBTC as collateral which would give you a liquidation price of $30,300 (54% drop in the BTC price)


liquid.webp

If you decide to go this route experiment with small amounts first so you can understand how everything works. Take a loan, close a loan , maybe even get liquidated:D
And make sure you give your loan plenty of wiggle room, I've seen huge liquidation wicks over the years , the last thing you want is to be liquidated while travelling or offline etc.
 
Last edited:
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#13
AnthonyR said:
Any time you transfer your BTC to a third party you are taking a counterparty risk that they'll be hacked, crash or run off with your money.

If I was going to go down this route I'd probably look at a big decentralised platform, something like AAVE, which has around $9bn in assets on the platform, including $2.4bn in WBTC. You wrap your BTC (risk), transfer to ETH (risk), deposit on Aave (risk) and borrow USDT (risk). You then send your USDT to your favourite exchange and cash out. Then hope and pray that BTC price doesn't crash below the risk threshold and liquidate you.
Click to expand...

So true...it's either counterparty risk or contract risk, can't escape it.
The reason I don't lend out my BTC. I will happily lend out and stake other crypto that is easily replaced though .
 
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#14
Freetrade said:
To do this in a more decentralized manner first you need to mint or convert the native BTC to one of the following:
- WBTC
-cbBTC (this is new and you need a coinbase account to go direct BTC ---> CBBTC)
-TBTC (relatively new but the most decentralized)

To mint TBTC you can go to https://dashboard.threshold.network/tBTC/mint
Then you could either use TBTC as the loan collateral (on protocols that support it) or swap it for CBBTC/WBTC on a DEX.

If you don't want to mint you could swap the BTC to ETH on chainflip or thorswap and then buy whichever one you want on a DEX but you might pay more in fees (and spread) this way.

Next head over to Defilama to see what the top lending protocols are(sort by TVL): https://defillama.com/protocols/Lending

Aave leads with 12 billion USD total value locked:

View attachment 8025

I've heard good things about fluid so lets take a look: https://fluid.instadapp.io/vaults/1/22/strategies/deposit-borrow
You can click on "simulation mode" in top right to play around.

Below we can see the borrow interest rate for USDT is 6.17% and to borrow 400k USDT you could use 15 WBTC as collateral which would give you a liquidation price of $30,300 (54% drop in the BTC price)


View attachment 8026

If you decide to go this route experiment with small amounts first so you can understand how everything works. Take a loan, close a loan , maybe even get liquidated:D
And make sure you give your loan plenty of wiggle room, I've seen huge liquidation wicks over the years , the last thing you want is to be liquidated while travelling or offline etc.
Click to expand...
what you described is very fragile and risky, definitely not worth it

I don't see any sensible way to use BTC as collateral except using reputable third party (arbiter) holding a multisig key to an address where the collateral is "locked" (for both sides of the contract) - in a way this is the future of banking sector
 
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#17
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