Today I'll be sharing with you a strategy to convert our interests earnings from lending USDC into Bitcoin, and then lending that Bitcoin to gain even more interest.
We'll be using two CeFi platforms to accomplish this, Celsius, where we'll be lending our USDC, and Blockfi, where we'll be able to trade our USDC for BTC and lend it out for further returns.
Lending out stablecoins is a very good replacement for holding cash in the bank where we only receive 0.1-1% interest on our money. By converting our dollars into stablecoins, such as USDC or DAI, we can earn upwards of 10% interest in a secure setting by lending.
If we ever need to spend our stablecoins, then we can easily sell them for their same and consistent value in fiat, and have the fiat deposited back to our bank. Stablecoins truly do create a bridge between the legacy financial fiat world and the world of cryptocurrency, and allow an investor to obtain cryptocurrencies such as Bitcoin without having to buy them directly.
To get started with this strategy, we first have to compare the offered APYs at both Celsius and Blockfi. The APY figures each company presents is the total interest of what we'll gain including the weekly or monthly compounding.
What we want to first do is determine how much interest we'll receive every month from lending our USDC on either Celsius or Blockfi.
Let's pull up a calculator to determine the actual APR before compounding interest as well as to see how much interest we're going to receive every month on both platforms.
To start, we have to understand the difference between what both platforms offer.
Blockfi offers 8.6% APY on USDC, which is paid out monthly, while Celsius currently offers 10.51% APY on USDC, which is paid out weekly.
Let's use $1000 as an example of how much interest we can earn.
Using the calculator at https://www.omnicalculator.com/finance/apy, we come up with these results.
After a month of lending 1000 USDC (valued at $1000 USD), we can expect a return of 6.90 USDC from Blockfi, and 8.36 USDC from Celsius.
Celsius is the clear winner with an extra 1.46 USDC gained in our first month, a difference of over 21%!
This is great, so now we know we can gain more USDC from our deposit by using Celsius, but what about converting those earnings to BTC? And what about lending that new BTC we have?
Well unfortunately right now, Celsius does not have an in-app swap ability to trade this new USDC profit for Bitcoin.
But, Blockfi does! And this is where they'll come into the picture as a way to swap our USDC earnings into Bitcoin.
So let's go ahead and withdraw our USDC from Celsius and send it to Blockfi. The best part of this is that Celsius has ZERO withdrawal fees, so we can easily withdraw our interest earnings whenever you want and send them out. (I'll be withdrawing my USDC interest earnings into Blockfi at the end of every month.)
In this next part of the example, I'll be withdrawing 12 USDC from Celsius and sending it into my Blockfi account.
Once it arrives in Blockfi, we'll see it show up in our transactions on the main page. Now we're ready to trade it out and swap our USDC for Bitcoin.
Head to the 'Trade' tab on the top of the screen, and then we'll submit a trade for our 12 USDC to Bitcoin. The current amount of BTC we'll receive is 0.00087891 BTC.
Once we review the trade and click submit, we'll see the confirmation and the full details.
We just traded our 12 USDC for 0.00087891 BTC, which when checking CoinGecko, shows a current value of $11.87.
This means ours fees were negligible, and only costed us essentially 0.13 USDC to make the trade. Because of the low trading fees, it makes sense to lend on Celsius and then withdraw to Blockfi to trade into Bitcoin, versus lending directly on Blockfi and losing out on almost 2% interest every month.
At this point, we now have 0.00087891 BTC added to our Blockfi Interest Account (BIA), where it's earning 6% interest.
Blockfi also offers 1 free crypto withdrawal every month, so it's possible to even withdraw this BTC and send it BACK to Celsius, where we earn 6.2% on Bitcoin, an extra 0.2% a year. It all adds up!
As crypto users, I feel it's best to always keep our eyes open and to never be too focused on only one project or utility, as multiple platforms are available which all compete, offering us diverse opportunities.
Both Celsius Network and Blockfi are amazing platforms I consistently use, and each one offers a signup bonus for new users with a referral code.
Celsius will give you $20 in Bitcoin for holding $200 of crypto assets in your account for 30 days when using my code '1331255003' to sign up.
Blockfi has a similar sign-on bonus, as they offer $10 in Bitcoin for holding at least $100 in crypto assets for 30 days. Use code '456f1d71' when signing up to claim yours!
I truly hope this strategy helps you in your crypto journey! Time to get some interest on our money!
