DeFi & CeFi Strategies To Construct Fresh Income

Seeking Out Fresh Opportunities

With the recent collapse of the Crypto market, a lot of yields within the DeFi space have dropped quite significantly. This is more in terms of stablecoin yields. However, CAKE continues to produce a very decent yield on an ongoing basis. The only problem is that the value of CAKE has dropped all the way down to the $12 level. This is both a problem and a blessing that can be utilized. As I meditated on the changes that have taken place in regards to yield and price, I decided to look at designing borrow/lend constructs that could work quite effectively in my favor. This is not only about creating fresh and additional income but generating new assets and increasing my portfolio.

Collateral is an important aspect to remember when it comes to the risk factor of loans within the Crypto space. Crypto loans are collateralized loans, meaning you are borrowing against what you actually already own. So in an absolute worse case scenario, you could lose your collateral. Unlike a traditional loan that can trap you in a series of ongoing repayments. If for whatever reason you are unable to pay back a Crypto loan, the collateral that you initially provided is then taken to settle the loan. The loan is then paid in full and you will not be burdened with an onslaught of monthly repayments and interest piling up.

Even though that does sound much more attractive, the risk factor is still there and design needs to be specific and offset as much risk as possible.

Utilizing Multiple Protocols

Just taking out a loan should not be confused with a financial strategy. The objective and aim needs to be very specific and planned out with a goal in sight. The first construct I am testing out makes use of 3 protocols. I am obviously not going to disclose exactly how I do it, especially as I am still testing the efficiency of this strategy, as well as the mechanics in regards to monthly interest payments and other specific criteria. When you study how money is made in any financial market, you will arrive at the same fundamental principle upon which they all hinge. 

This is the underlying law that the movement of money generates more money. If money is moved smartly, it will grow. Looking at a very simple example you can see that the correct timing and movement of money will indeed create more! For instance, someone selling BTC at the 2017 top, who then went into stablecoins made a good move. If he then went back into BTC at 3K and caught the wave into this new bull run, he would have done well. Had he combined all these moves with a movement into MATIC when it started performing, even better. In a perfect situation he would have moved into stablecoins again in May.

So, it is not merely the movement of money or capital that counts but the smart movement thereof. When you incorporate DeFi into the picture, the story matures beyond buy low/sell high! You have to plan and understand your strategy so as to maximize it and protect it in the case that markets deviate from your ideal roadmap. You have to have counter measures, as well as time on your side, in order to overcome potential challenges.

All of this needs to be factored into your strategic approach and will require some time and thought on your behalf.

Least Barrier To Entry

When looking at centralized services for Crypto loans, the minimum requirement is quite high and will most likely exclude some. BlockFi is very high, at $10K if I am not mistaken. Celsius seems to offer the best opportunity with the minimum loan amount being $500! Binance however also offer the service but the maximum term is only 180 days, which is a bit short for my strategy. Ideally, you want to have the repayment term as long as possible, for the simple reason that you do not need to use it. You can pay off a loan much earlier than agreed upon without any penalty, provided you have paid at least 6 months of interest.

This is in the case of Celsius, taking into account that other services may differ. However you may choose to tackle this opportunity, please do your own extensive research and remember that this is merely informative and not investment advice!