The Best Ways to Earn When You Don’t Want to Sell Your Bitcoin in 2021
As Bitcoin jumped to over $60,000 this year, 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 any of these valuable coins. Nobody knows the top-end value of Bitcoin, but as more major financial institutions warm up to the concept, there’s definitely going to 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 in 2021.
Use Your BTC as Collateral
Did you know that 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, there are usually no credit checks necessary to qualify for these loans.
Why Get a BTC Loan?
The main reason why you would want to get a loan with your Bitcoin is to buy more cryptocurrency. This strategy allows you to strengthen your position or diversify your portfolio. 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 get 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 pay back 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 – A Smarter Way to Buy Your Bitcoin
For investors seeking to get 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 time period. The strategy has become hugely popular as of late 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 highs, 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 daily, weekly, or monthly purchases. Imagine that you invested $1000 a week into Bitcoin. You would notice the purchase price would fluctuate from week to week.
For this example, let’s say that 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. There are some serious advantages you gain from wrapping your BTC in terms of earning potential. For one, Wrapped BTC can leverage all the earning potential of the Ethereum ecosystem, 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. The advantages of this strategy go both ways in that 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. DeFi lending protocols are more popular than ever because they are simple to use and allow the borrower to repay their loans in a relaxed manner while still ensuring you receive your repayment on time.
Of course, the most tried-and-true method to earn profits is to let your BTC remain untouched. While HODLing seems basic in terms of strategy, it actually requires a lot of emotional control. Imagine it was 2017, and you just 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. For those who lost their cool and got shaky hands, the losses were felt.
In 2021 You can HODL and Earn
Now that you have more insight into how not to sell your Bitcoin and still turn healthy ROIs in 2021, it’s crucial to mention that some of these protocols are still new to the market. 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.