Borrowing on LendaBit.com and Long Position on Bitcoin Price Growth
In the light of the ongoing crypto market fluctuations, crypto holders adjust their lines of conduct with an aim of preserving and, more often than not, multiplying their assets. One of the methods how to benefit from the bullish upward trend is briefly described by LendaBit.com, a P2P lending platform for loans secured by crypto collateral, which managed to witness a characteristic pattern by one of platform users who pleasantly agree to disclose their short-term strategy (LendaBit.com maintains participant’s anonymity and confidentiality and doesn’t disclose any personal details).
By considering crypto market volatility, there’s always a solution to the problem. The platform user decided to long sell BTC and emerge profitable from crypto lending services provided by LendaBit.com. Let’s demonstrate it step-by-step to get the whole picture of the given situation:
- As of December 15, the Bitcoin rate equaled $3250 (see the Price Graph).
- The customer pledged collateral in the sum of 1 BTC in order to apply for a USDT loan.
- Afterwards, they’re eligible to take the crypto loan totaling to 1625 USDT (or, in other words, 0.5 BTC) for a period of five days (long position) since initial LTV ratio has to be twice the sum of the loan in accordance with the platform’s Loan Terms and Benchmarks.
- The customer bought 0.5 BTC for the lent USDT amount by using crypto exchange services.
- Platform service fee accounted for 3% (1625 USDT× 3% = 48.75 USDT).
- Annual Percentage Rate (APR) for five days equaled 8% (1625 USDT × 8% × 5 days/360 days = 1.81 USDT).
- Total expenses: 48.75 USDT + 1.81 USDT = 50.56 USDT.
- In five days (December 20), BTC was priced at $4050.
- The customer sold 0.5 BTC for $2025.
- The difference in prices amounted to $400 ($2025 ꟷ $1625 = $400).
- Net income: Total customer’s income ($400) ꟷ Total expenses (50.56 USDT) = $349.44.
What a bargain!
To sum it up, the user could safely return their crypto assets (pledged 1BTC collateral) and earned a profit in the amount of $349.44. Connectively, if they borrowed more, the greater reward would’ve been received. Long selling can be risky and isn’t recommended to non-professionals or inexperienced participants of the crypto market. Therefore, it is advised to thoroughly calculate all the positive and negative aspects of going either long or short.
Deniss has been in asset and risk management for more than 20 years in one of the top Latvian banks.
He is highly proficient in finance, investing, blockchain and startup development.
Being CEO at LendaBit.com, he is dedicated to solving company problems using impeccable judgment and critical thinking skills.