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The Best Ways to Earn When You Don’t Want to Sell Your Bitcoin
It has become evident to many in the market that HODLing is a smart strategy. It’s easy to see why you wouldn’t want to relinquish ownership of these valuable coins. Nobody knows the top-end value of Bitcoin, but as more major financial institutions warm up to the concept, there will be a growing demand for the coin moving forward.
While HODLing Bitcoin is profitable, it’s not the only way to retain ownership of your coins and still make a healthy ROI. The recent introduction of some innovative platforms has opened the door to new and exciting HODL-based protocols. These platforms allow you to keep ownership of your precious Satoshis and earn extra profits on top of the coin’s appreciation. Here are the best ways to make extra profits when you don’t want to sell your Bitcoin.
Use Your BTC as Collateral
Did you know you can use your Bitcoin as collateral for fiat and crypto loans? There has been a steady increase in the introduction of platforms that allow you to borrow funds using your Bitcoin – these loans provide a lower APR than many bank loans.
In most instances, you only need to meet a certain loan-to-value ratio to qualify. Crypto direct loans are often more private and only require minimum information. Moreover, no credit checks are usually necessary to qualify for these loans.
Why Get a BTC Loan?
You mainly want to get a loan with your Bitcoin to buy more cryptocurrency. This strategy allows you to strengthen your position or diversify your portfolio. Moreover, as most firms are willing to loan you double your collateral, this advanced trading strategy provides you with more leverage.
Notably, you’re not stuck using these funds for only crypto-related services. Since many lenders offer fiat currency options, you could use the money to invest in a business, buy a home, or help you through some tough times. During the pandemic, this strategy has seen growing adoption as well.
Another major advantage of Bitcoin lending services is their flexibility compared to regular lenders. For example, most BTC lenders allow you to repay your loan early without any prepayment penalties. Best of all, it’s becoming common for these platforms to provide you with same-day loan payment options. This means you receive your loan as soon as you provide the necessary collateral.
Dollar-Cost Average (DCA)
For investors seeking a loan to purchase more Bitcoin, it’s important to understand how Dollar Cost Averaging can save on your overall purchases. Dollar-Cost Averaging (DCA) is a term used by investors to describe a buying method in which you break up your entry positions over a set period. The strategy has become hugely popular because it saves you in the long run.
For example, if you want to buy $10,000 in Bitcoin, you could get a loan and make that purchase. However, the market is at its all-time high, and there is no way to tell what the future holds. While most would agree Bitcoin’s value will increase due to growing demand, the short-term outlook is not as stable. One way professional investors mitigate these concerns is through DCA.
How to DCA
A safer way to invest that $10,000 into Bitcoin would be to spread it out to daily, weekly, or monthly purchases. Imagine that you invested $1000 a week into Bitcoin. You will notice the purchase price fluctuates from week to week.
For this example, let’s say your purchases ranged from BTC at $57,000 to $49,000. While it’s true, you didn’t get the overall greatest rate had you caught the buy on $49,000, and you still saved considerably over making the $57,000 purchase directly.
In this example, your average purchase price evens out to $53,000. Now imagine taking this strategy and spreading it over a year. At the end of the year, you would hold a considerable amount of Bitcoin, and you would have saved yourself a bundle versus had you purchased the coin at its all-time high and held.
Wrap Your BTC – DeFi
Another popular option that continues to see adoption is wrapped BTC. Wrapped BTC is BTC that has been transferred over to any ETH token. As a result, you gain some serious advantages from wrapping your BTC in terms of earning potential. For one, Wrapped BTC can leverage the Ethereum ecosystem’s earning potential, including popular DeFi protocols.
Stake Your BTC
Once your Bitcoin is wrapped, you can stake and farm your WBTC on the most popular DeFi networks. Staking is ideal for HODLers because you never relinquish ownership of your coins. Instead, you agree to lock them into a smart contract known as a liquidity pool in return for rewards. This strategy’s advantages go both ways: you gain added profits, and the Ethereum ecosystem gains needed liquidity.
Lend Your wBTC Out
WBTC also opens the door to decentralized lending protocols. These networks function similarly to staking in that you will need to provide liquidity to a pool, and in return, you will receive additional crypto. However, in a lending format, your profits are the interest payments made by the borrower. As a result, deFi lending protocols are more popular than ever because they are simple to use and allow borrowers to repay their loans relaxedly while ensuring they receive their repayment on time.
Of course, the most tried-and-true method to earn profits is to keep your BTC untouched. While HODLing seems basic in terms of strategy, it requires a lot of emotional control. Imagine it was 2017, and you purchased your BTC at $20,000. The next two years were a bear market that saw the value drop to $3000. Would you have been able to HODL in these conditions? For those who did, the rewards were great. Unfortunately, the losses were felt by those who lost their cool and got shaky hands.
You can still HODL and Earn
Now that you have more insight into how not to sell your Bitcoin and still turn healthy ROIs, it’s crucial to mention that some of these protocols are still new to the market. Therefore, you will always want to DYOR and stick to the most reputable platforms. By doing this, you are guaranteed to keep your BTC safe while you secure profits on top of the appreciation.