|1. Don’t “buy the dip”.|
|2. Sell the current wallet instead of taking out a crypto loan.|
|3. Improper market research before taking out a crypto loan.|
|4. Ignore short-term trading opportunities|
|5. Ignore when the crypto loan margin call is red.|
|Crypto loans in 3 steps|
Crypto lending has been around since the dawn of smart contracts and decentralized finance. The idea of crypto loans has become popular over the years as the industry continues to grow. Several crypto lending platforms have sprung up and have continued to provide top-notch crypto lending services to customers around the world. However, many investors make common mistakes with crypto loans due to the volatile nature of cryptocurrencies and crypto loans.
The crypto market is the most active market for retail and institutional investors. The high volatility can lead to massive price fluctuations which primarily affect the overall value of the investment portfolio. Due to these sudden price changes, investors often make hasty decisions that turn out to be serious investment mistakes. This article demystifies some of the most common mistakes with crypto loans.
1. Don’t “buy the dip”.
Often when the crypto market turns red, some crypto investors interpret it as the end of times and continue to lament the downside as they think they are losing money on their investments. However, a long-term investment strategy takes advantage of significant price declines. Whenever a dip occurs, seasoned crypto investors view it as an opportunity to buy the dip. Below is a chart of Bitcoin prices over the years from 2013 to 2022 showing how declines are part of the growth journey.
Bitcoin Price Action for 2013 to 2022 by CoinMarket Cap
So what does “buy the dip” mean?
Crypto investors can take advantage of falling prices to buy more crypto tokens. Whenever prices fall, seasoned crypto investors use crypto-backed loans and invest in promising digital assets that would earn more interest in the long run. For example, here is a chart that shows Bitcoin’s long-term price prediction.
2. Sell the current wallet instead of taking out a crypto loan.
Making investments is a difficult part for most people. Financial literacy is essential for financial success. Whenever someone needs a loan, there are often better options to obtain without harming their property or investment portfolio.
Whenever faced with financial constraints, people often rush to sell expensive and most valuable assets, such as houses. Others spend their savings or deplete their salaries to advance their investments.
This mistake is a common one for investors – ignoring the huge investment opportunities that open up crypto loans and keep turning the funds held. Crypto lending platforms provide a safer option that allows taking out cryptocurrency loans by borrowing against crypto collateral. The best crypto platforms allow users to take out quick and accessible loans for an indefinite period and pay them back as soon as they are ready. These crypto loans provide significant hedging against investment risk and protect crypto investors from unnecessary market risk.
3. Improper market research before taking out a crypto loan.
Crypto loans from different platforms often come with different terms and conditions. Taking out crypto-backed loans without proper background checks is as risky as investing in a crypto project without doing any research.
Many crypto users fall into the trap of looking for attractive returns that are often above market rates without investigating how these companies generate additional profits. Here are some factors to consider;
The best crypto lending platforms generate profits from the loan interest earned. However, some platforms use the locked collateral to trade on third-party platforms that attract more interest. These additional investments expose crypto loan users to risks that can often lead to loss of collateral. A reliable crypto lending platform should only depend on interest rates and lock loan collateral in safe cold wallets to protect their clients from unnecessary risk.
Crypto lending platforms sometimes form partnerships with other industry players to ensure smooth processes. Platforms with big industry players as partners are often more credible.
Crypto lending platforms need to process loans and security deposits quickly and efficiently. If a platform has robust APIs that are too large, it can take extremely long to receive your loan amounts.
4. Ignore short-term trading opportunities
The high volatility in the crypto market is essentially a double-edged sword. Day traders and carvers often take advantage of daily price changes to make more profitable trades. These short-term strategies are sometimes more profitable than long-term strategies that involve holding tokens even when the market is red.
Experienced day traders can use fast cryptocurrency loans to trade, earn profits during the day, and repay the loans at the end of the day to retain the profits. Such strategies often benefit smart hands that can take advantage of good trading opportunities on daily market trends.
5. Ignore when the crypto loan margin call is red.
Crypto-backed loans are issued by depositing your preferred crypto as collateral before receiving loan amounts on stablecoins of your choice. It is essential to monitor the Loan-to-Value ratio when funding crypto because it determines your liquidation price.
Since the crypto market is a 24-hour market, prices change every time, allowing for quick liquidation. Some of the big crypto lending platforms have effective notification systems that monitor collateral levels and notify users of their loan status to top up their crypto collateral whenever the liquidation price is near.
Crypto loans in 3 steps
CoinRabbit crypto lending platform has an excellent track record of credibility and trust in handling client crypto collateral. The platform has gained considerable trust in the industry through its partnerships with major companies such as ChangeNow, Atomic Wallet, and Guarda Wallet, greatly improving the overall experience of crypto lending users on the platform.
Here is a guide on how to get a quick loan from CoinRabbit’s crypto lending platform.
- Calculate. – On the loan calculator, enter the collateral amount to calculate the loan amount to be disbursed.
- Get in 15 minutes – Post your collateral and wait around 15 minutes for your loan to be disbursed.
- Spend – Receive your loan amounts and spend them wisely.
Borrowing against crypto is a fantastic way to preserve your portfolio while creating more investment opportunities. Crypto-backed loans can open more investment doors and build your crypto portfolio avoiding the mistakes described above.