@NovISa
Using DeFi Loans as Smart Leverage (My Current Setup) I recently **took out a loan equal to roughly 2% of my total portfolio**, fully backed by crypto, using the DeFi platform **Cream.finance**. I used **DPI**, which I already hold long-term, as collateral. On Cream, you can borrow stablecoins like **USDT, USDC, or DAI** at an interest rate of around **15%**. At first glance that sounds expensive, but here’s where it gets interesting: you also **earn interest on your deposited collateral**, roughly **3%**. Since I locked up collateral worth about **4x the loan amount**, my **effective net interest cost drops to around 4%**. That’s a great deal in my view. In traditional finance, even the best margin loans — like those from **Interactive Brokers**, backed by stocks — still cost around **5%**, and come with more restrictions on how you can use the money. Risk Management and Liquidation Mechanics Taking loans against your assets and **levering up** your investments obviously comes with risk. If prices have already gone up a lot, a sharp pullback can trigger margin calls. That said, I don’t think we’re in that kind of market right now — at least not in crypto. For **DPI**, Cream requires a **45% loan-to-value (LTV)** ratio. If your loan value creeps above that threshold, the protocol **starts liquidating your collateral** to make sure the loan gets paid back. An interesting detail is that liquidation is fully decentralized: **anyone can step in, liquidate your position, and earn an 8% bonus** for doing so — which of course comes straight out of your pocket. That’s why maxing out the loan makes no sense. Instead of borrowing up to 45%, I went with roughly **half of that, around 22.5% LTV**. This means the price of DPI would need to **drop another 50%** before liquidation becomes an issue. Assessing the Odds So what are the chances that crypto — and DPI in particular — **falls another 50% after already dropping about 50% over the past month**? Personally, I’d put the odds at around **10%**. That’s a risk I’m willing to take, especially if the borrowed capital can be **put to work in an uncorrelated opportunity**. What I’m currently looking at is investing in **hotels and resorts**, a sector that got **completely beaten down** by pandemic-related restrictions. These kinds of opportunities likely won’t stick around for long — once borders open up and tourism starts picking up again, prices could **snap back pretty quickly**. If things do go south and crypto takes another major hit, I still have options. I can **wind down** the resort investment if it’s liquid enough, or **free up capital** by closing other positions — like my short gold exposure, airlines, or tankers — to **top up my collateral** and avoid liquidation. BCH and the Search for Better Options Right now, I’ve **fully collateralized my 9% DPI position**, but I’m still trying to figure out a clean way to do the same with **BCH**. Using Cream for BCH would mean going through **Binance Smart Chain**, which requires wrapping BCH via Binance. That adds **counterparty risk**, and I’m not too keen on taking that on. CeFi platforms like **Nexo** are an option, but at **15% interest**, with **no yield on BCH collateral**, it feels overpriced. **Celsius** is another alternative, but given the founder’s track record, it’s not a platform I’m comfortable relying on. If anyone knows a **solid way to borrow against BCH** without jumping through too many hoops, I’m all ears. Other Portfolio Notes Outside of that, I’m not doing much reshuffling. My **short GLD options** are starting to **pay off** as gold shows renewed weakness. I still think the **risk/reward looks attractive**, especially for **160 strike puts expiring later this year**. A move down to **GLD 150 or lower** wouldn’t surprise me at all. I’m also continuing to **invest in and support the BCH ecosystem**, especially after big price drops. When the market gets hit hard, I actually like to **step in and buy**, often using **non-crypto capital** like cash or margin from my stock broker. Technically, that’s bending my own Kelly-criterion rules a bit, since I’m not supposed to increase BCH exposure — but we’re talking about just a few percent, so I’m fine with it.
