Cryptocurrency lending platforms first came as a solution for longterm “HODLers” who needed quick access to fiat currency without having to sell their favorite crypto assets. This guaranteed they would not miss out on any future bull runs since they are simply lending their crypto as collateral which is then returned at a later date. Fast-forward a couple of years and the crypto lending industry has taken on a life on its own, particularly amongst cryptocurrency traders.
Using margin trading techniques commonly seen in traditional stock markets, crypto traders are using crypto loans as a method to acquire large portions of cryptocurrency with a relatively small amount of starting capital.
Instead of using a loan as a simple, temporary exchange of crypto for fiat, crypto traders are using borrowed funds as a multiplication tool. For example, let’s look at margin trading in the traditional market. If you have $100 to invest in a currency pair like EUR/USD, you can set your maximum multiplication levels (e.g. 1:40). This ratio means that for every $1 you invest, the lender gives you $40 to trade. Since you invested $100, that means you now have $4,000 to trade. Different brokers offer different sorts of margins and maximum multiplication ratios. Now, let’s see how this same principle can be utilized in the crypto market.
To reenact the aforementioned scenario, one must find a platform with margin trading tools included (e.g. YouHodler). YouHolder’s Multi HODL™ feature is essentially an easy to use, automated margin trading tool that lets traders open potentially very large trades using a small, initial investment. Just like the traditional margin trading brokers, users can set their desired risk/profit levels on Multi HODL™
For this example, let’s say 1 BTC = $10,000
If you want to buy 1 BTC for 15% of its value all you need is:
In a bull market, the value of these trades can increase rapidly, meaning the user keeps all the residual profit and the broker (YouHodler) simply charges a loan fee. When the user chooses to close the Multi HODL™, they get back their initial investment, (in this case, $1,500) and whatever is leftover as well (in this case, the extra $8,250 earned from this investment).
Of course, margin trading in this way entirely depends on market conditions and the levels of risk and profit the user sets. In the case of a decline in market prices, they will get their initial deposit back minus the factual loss.
Loans are no longer a basic, temporary exchange of value. They are a strategic tool to help those access large amounts of funds with a small amount of capital. Making this even more efficient is YouHodler’s Multi HODL™ tool. Using this tool, clients can utilize advanced margin trading techniques without expertise. It’s 100% automated and features a clean interface for beginners and professionals alike. So visit YouHodler.com today to explore this new tool and buy BTC with 15% of its value.