The Wolf Den #331 - Taking A Loan Against Your Coins
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This newsletter is sponsored by PHEMEX, the world's best crypto exchange for both spot and leverage. Sign up with the link above and get some free Bitcoin. I really encourage you to check them out.One of the most popular long-term strategies for savvy investors is to take a loan against the assets they own instead of selling and triggering a taxable event. I am not an accountant, but roughly speaking you should expect to pay 20% to 40% in the United States on the sale of any asset, including crypto. Investors are desperate for any legal way to avoid paying this steep price, which is why loan services have gained popularity.BlockFi, Celsius Network, and Nexo are some of the popular platforms offering crypto loans. The process is easy and quick. You don't have to go anywhere, talk to anyone, or share extensive personal information.Here is how the process typically works. You select an asset as collateral that the platform accepts - this is typically Bitcoin, Ethereum, Litecoin, or some stablecoins. You then enter the desired loan amount. The platform then generates an amount of collateral that you need to deposit to receive the loan. As a rule of thumb, the platforms require a sizable minimum - 10K on BlockFi. The beauty of putting up collateral is that there is no credit check or process required - they have the coins, you have the loan.After entering the desired loan amount, the program back calculates the collateral required plus interest. The platform is incurring risk and clearly needs to make money, so the terms are not the same as standard loans. The platform generates a figure called a loan-to-value ratio which compares the amount of your collateral with the appraised value of the loan. Expect this figure to be anywhere from 30%-50%. A 50% LTV ratio means the loan is half the value you put up as collateral. In other words, if you want to borrow a million dollars, you will have to hand over 2 million in coins. Clearly this is a far cry from a 3% mortgage or standard loan with a very small down payment.To get a lower interest rate, you need a lower LTV, which requires more collateral. Each loan is different and varies based on the risk you are willing to incur. It will typically be settled within a day and can be paid out in USD or a stablecoin. You can do whatever you choose with the loan - the money is yours.There is risk. If you fail to pay back the loan in full or make the interest payments, you will have overpaid dramatically for the loan. Further, if the price of your collateral drops significantly, you will be at risk of a margin call and liquidation of assets if you do not have more coins to add as collateral.I expect this option to become more popular and efficient further down the road. Billionaires do it all the time with their assets to avoid being taxed - it’s completely legal. As more platforms offer this service, I expect consumers to receive better terms. This process is still in it's infancy and will likely be adopted by legacy banks in the future.Like any strategy, this one comes with obvious risks so do it at your own discretion. IF YOU HAVE ANY ISSUE WITH THE NEWSLETTER OR YOUR SUBSCRIPTION, PLEASE CONTACT: PREMIUMSUPPORT@GETREVUE.COIn This Issue:Taking A Loan Against Your CoinsBitcoin Thoughts And AnalysisAltcoin ChartsLegacy MarketsTrade For Two ReasonsThe First Satoshi StatueAMC Is Accepting More Than BitcoinMy Recommended Platforms And Tools
The Wolf Den #331 - Taking A Loan Against Your Coins
The Wolf Den #331 - Taking A Loan Against…
The Wolf Den #331 - Taking A Loan Against Your Coins
This newsletter is sponsored by PHEMEX, the world's best crypto exchange for both spot and leverage. Sign up with the link above and get some free Bitcoin. I really encourage you to check them out.One of the most popular long-term strategies for savvy investors is to take a loan against the assets they own instead of selling and triggering a taxable event. I am not an accountant, but roughly speaking you should expect to pay 20% to 40% in the United States on the sale of any asset, including crypto. Investors are desperate for any legal way to avoid paying this steep price, which is why loan services have gained popularity.BlockFi, Celsius Network, and Nexo are some of the popular platforms offering crypto loans. The process is easy and quick. You don't have to go anywhere, talk to anyone, or share extensive personal information.Here is how the process typically works. You select an asset as collateral that the platform accepts - this is typically Bitcoin, Ethereum, Litecoin, or some stablecoins. You then enter the desired loan amount. The platform then generates an amount of collateral that you need to deposit to receive the loan. As a rule of thumb, the platforms require a sizable minimum - 10K on BlockFi. The beauty of putting up collateral is that there is no credit check or process required - they have the coins, you have the loan.After entering the desired loan amount, the program back calculates the collateral required plus interest. The platform is incurring risk and clearly needs to make money, so the terms are not the same as standard loans. The platform generates a figure called a loan-to-value ratio which compares the amount of your collateral with the appraised value of the loan. Expect this figure to be anywhere from 30%-50%. A 50% LTV ratio means the loan is half the value you put up as collateral. In other words, if you want to borrow a million dollars, you will have to hand over 2 million in coins. Clearly this is a far cry from a 3% mortgage or standard loan with a very small down payment.To get a lower interest rate, you need a lower LTV, which requires more collateral. Each loan is different and varies based on the risk you are willing to incur. It will typically be settled within a day and can be paid out in USD or a stablecoin. You can do whatever you choose with the loan - the money is yours.There is risk. If you fail to pay back the loan in full or make the interest payments, you will have overpaid dramatically for the loan. Further, if the price of your collateral drops significantly, you will be at risk of a margin call and liquidation of assets if you do not have more coins to add as collateral.I expect this option to become more popular and efficient further down the road. Billionaires do it all the time with their assets to avoid being taxed - it’s completely legal. As more platforms offer this service, I expect consumers to receive better terms. This process is still in it's infancy and will likely be adopted by legacy banks in the future.Like any strategy, this one comes with obvious risks so do it at your own discretion. IF YOU HAVE ANY ISSUE WITH THE NEWSLETTER OR YOUR SUBSCRIPTION, PLEASE CONTACT: PREMIUMSUPPORT@GETREVUE.COIn This Issue:Taking A Loan Against Your CoinsBitcoin Thoughts And AnalysisAltcoin ChartsLegacy MarketsTrade For Two ReasonsThe First Satoshi StatueAMC Is Accepting More Than BitcoinMy Recommended Platforms And Tools