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Bitcoin can simply be bought and held – it’s already a great strategy where you own the most reliable and promising asset on the planet. But bitcoin can be used in a variety of tools to make additional profits. Let’s try to figure out how to increase your Bitcoins and start earning passive income on your cryptocurrency?
Use decentralized Lending platforms. This can be AAVE, Sovryn, Larix and others.
By contributing bitcoins to these platforms, you receive a % for allowing other users to borrow your asset. In doing so, they leave a pledge in a smart contract (e.g., in USDT), which ensures the safety of your asset.
The rate of return can vary depending on the platform, the network on which the platform operates, and the total number of bitcoins available for borrowing on that platform. On average, you can earn between 2 and 6 percent per year for Lending bitcoin. Rewards can be withdrawn immediately. Best of all, it’s all decentralized and without third-party involvement.
To use Lending platforms, you will need to convert your “standard” bitcoins into bitcoins that are supported by the desired network. For example, if you use Avalanche-based AAVE, you will need to convert your BTC to WBTC.E. If we use Sovryn, BTC to rBTC.
Use BTC bitcoin as collateral to take debt in steblecoin
If you deposit your bitcoin on one of the Lending platforms, you can use it as collateral to take out a loan. For example, if we deposit WBTC.E on AAVE, we can borrow USDT, USDC, or DAI. At the same time your bitcoin is still generating yield while in the lending platform.
Then, the resulting Stablecoins can be used in other DeFi tools. For example, put them into Anchor Protocol and get 20% per year. Or use them to provide liquidity to various AMM markets. And spend all the profit to buy bitcoin.
Of course, you should not forget about liquidation. It occurs if the amount of your loan falls to a certain value. Therefore, it is worth borrowing 30-40% of the value of your pledged asset.
Provide liquidity in the pair on AMM markets
All of you are familiar with Uniswap. It is a protocol for decentralized token exchange. It works through liquidity pools. One of the popular pairs on Uniswap is ETH-USDT. But how does it work?
Any user can deposit liquidity in ETH-USDT pair and receive % from each transaction in this pair. It is at the expense of people who contribute liquidity that there is a possibility of exchange. The yield for providing liquidity also varies depending on the volume of trades in the pair, on the protocol, and on possible rewards in the form of platform tokens. There are similar pairs with bitcoin as well. For example, WBTC-USDT, WBTC-USDC, WBTC-DAI. It is better to provide liquidity in a single-stablecoin pair to avoid Impermanent Loss.
Naturally, we are not limited to one Uniswap. There is Sovryn with the rBTC-XUSD pair with a yield of 80% for the year. There are TraderJoe, Pangolyn, Saber and many other AMM platforms. Competently using Lending platforms and loans you can achieve quite a high level of profitability.