How to multiply return on bitcoin investment by 172% on Biterest?
In this article, we share how to multiply the profit with Biterest by depositing loans on the account balance.
Jun 30, 2020 · 6 min read
How to maximize the profit while HODLing bitcoin
Let's consider an example: Mike invested $10,000 in bitcoin and bought 1.09378531 BTC when a price of Bitcoin was $9,142. After that he applied for bitcoin-backed loans on Biterest in order to multiply his profit. This model was called "Smart Hodl".
Mike topped up his balance on Biterest with 1.09378531 BTC ($10,000). On Biterest, a loan-to-value ratio is 83% — the highest among different crypto-backed services — that's why Mike was able to receive up to $8,333 in a loan.
The dashboard after depositing the initial investment
Mike applied for his first loan of $7,500 and chose the option to instantly deposit the loan amount to the account balance.
The completed form to receive the first loan
The amount to receive of 0.82033916 BTC was automatically added to his balance. After that Mike's total balance increased to 1.91412447 BTC ($17,500) and this let him to borrow more.
The dashboard after depositing the first loan on the balance
Mike's new loan limit increased and he applied for the second loan of $6,000 and 0.65627133 BTC was instantly deposited to his balance.
The confirmation window to receive the second loan
After the second loan Mike's balance increased to 2.57039580 BTC ($23,500). The LTV became 58%.
The dashboard after depositing the second loan on the balance
Lastly, Mike applied for the third loan of $5,000. The amount to receive in bitcoin was 0.54689277 BTC. Mike's balance increased totally to 3.11728857 BTC($28,500).
The dashboard after depositing the third loan on the balance
Mike would be able to receive more loans while the LTV (loan-to-value ratio) was 65% and available amount to borrow was $5,243.92. However, Mike decided stop as the LTV was increasing after the each issued loan. The next loan of $5,000 would increase LTV to 70%. The greater is the LTV, the higher is the risk of automatical loan repayment (Margin Call) if Bitcoin price sharply drops. It is recommended to maintain LTV ratio around 50-65%.
To sum up:
Mike received three loans which were deposited to his account balance in the total amount of 2.02350326 BTC ($18,500) although his initial collateral was only 1.09378531 BTC ($10,000). Let's fill the table with these figures:
BTC price: 9142 USD
Initial investment: 10000 USD (1.09378531BTC)
First loan: 7500 USD
Added to the balance: 0.82033916 BTC (7500 USD)
Second loan: 6000 USD
Added to the balance: 0.65627133 BTC (6000 USD)
Third loan: 5000 USD
Added to the balance: 0.54689277 BTC(5000 USD)
30 days later, Bitcoin price increased by 14,8% (from $9,142 to $10,500), therefore, Mike's balance increased to $32,718 (by 14,8% too).
The dashboard after 14,8% increase of Bitcoin price
Let's compare Mike's profits:
1) If Mike didn't receive bitcoin-backed loansMike's initial investment was in the amount of $10,000 (1.09378531 BTC). When the Bitcoin price increased from 9142 USD to 10500 USD (14,8%), his investment would increased in cost to $11,480. Mike would earn$1,480.
2) After Mike received bitcoin-backed loansMike's total investments made up 3.11728857 BTC or $28,500 at the Bitcoin price of 9,142 USD. After 14,8% increase in Bitcoin price, the cost of his investment on Biterest account balance increased to $32,718. Mike's used loan limit made up $18,500 + $185 of accured interest 30 days later (1% per month). Mike chose to repay the loan ($18,685) with bitcoin from his account balance ($32,718).
In result, after repayment his balance became $14,033 (1,33647619 BTC). Excluding the initial $10,000 (1.09378531 BTC), Mike made a profit of $4,033 and 0.24269088 BTC.
Due to a 14,8% increase of Bitcoin price, Mike earned extra 2,555 in USD and 0.24269088 in BTC by using Smart Hodl model on Biterest.