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The strategy with little capital and no exposure to volatility theoretically works like this:
1. Ask for a loan, placing the cryptocurrency of your choice, USDC, BTC, ETH etc.
2. Generally, you should ask for between 50%, 60% or 70% of the capital that you will place as collateral.
(In these cases, for placing your money, an APR will generate dividends because your capital will be borrowed, while the loan you borrow will charge you interest).
3. To pay that debt and obtain profits, assuming that the interest rate is 5%, with the money you were given from the loan, you place it in a “DeFi” protocol that generates more than the 5% that you are being charged and thus obtain profits.
(Assuming you put the money to work, and they give you a 20% APR, you will earn 15%, while with the other 5% you pay the debt).
This way you get more money without exposing yourself to volatility and without liquidation risk.
I will elaborate on this in more detail. 9 replies
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