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How to Multiply your Bitcoin

With Bitcoin reaching new all time high (ATH) lately around 42k$ and Ethereum rushing towards 2k$ I came to the conclusion that I have too few coins in my crypto portfolio.

In this post I will show you several ways to multiply your Bitcoin or Ethereum within the crypto ecosystem with different risk / reward ratios. Some links are affiliate links to the services presented.

Why you want to Multiply your Bitcoin / Ethereum

Obviously, there is always the way to buy more crypto currencies with fiat money, e.g. US Dollar or EUR. As most of us are limited on fiat and receive a comparable small dosis of it on a monthly basis I do not want to address this boring way of increasing your coins.

Holding crypto can make a big Difference

At the moment Bitcoin market capitalization (MC) in US Dollars is less than 1/10-th of Gold. Gold still – as an ancient asset as it may be – for a lot of people is a solid store of value. Bitcoin can become this store of value too and reach 1/2 or even the MC of Gold. Therefore, as Bitcoin is limited in supply, the price can easily 10x from where we are today.

Imagine, you are able to multiply your bitcoin from x to x + 0.1. In the future, say Bitcoin reaches 400.000$, this 0.1 Bitcoin is very valuable: it will be worth 40.000$.

3 Ways to Multiply Bitcoin

There are several ways to let your crypto work for you. I ordered them from effort / work it takes you from small to large. Coincidentally the risk of losing some (or all) increases in the same way. Please note, that this is no investment advice. Do your own research. Only invest what you understand. Only invest what you are able to lose.

Use Decentralized Finance (DeFi) Services

2021 will be the year of Decentralized Finance (DeFI) services, many of them based on the Ethereum network!

I’m sure you know centralized finance services, like lending or borrowing money e.g. from a bank. You pay or earn interest on the capital provided. However, most people only borrow money and do not lend it – especially not to banks. Having a credit cards offered by a bank is also a classical centralized finance service.

There are centralized ways to lend fiat money via so called P2P platforms like Mintos, but not for crypto currencies at the moment. Typically you can earn between 5% and 10% annual percentage yield (APY) there.

DeFi Services explained

  • Lending: This is your classic savings account. It means, you give (lend) your cryptos for a given time period (called a batch) to someone else and earn interest on it.
    Typically interest is between 1% and 6% APY. For example on Binance, you get ~ 1% on Bitcoin and 6% on USDT.
  • Staking: For the consensus mechanism Proof of Stake you can stake (give) your coins to a Master Node, which then takes part in the consensus mechanism of the network, hence strengthens decentralization.

    Ethereum is planning to move to Proof of Stake with ETH 2.0 during 2021. You can already stake ETH 2.0 e.g. at Kraken.
  • Liquidity Mining: Think about a centralized exchange, even a classical one for fiat money (bank or exchange office). For each pair of currencies, e.g. EUR/USD they need a supply of bills (both sides) so people can change from EUR to USD and vice versa (called liquidity). The bank earns the spread between buy and sell price. In a centralized system, this trading pair is supported by the bank (exchange). In DeFi, the users have to provide liquidity to the Decentralized Exchange (DEX) with coins from their own supply and earn a part of the DEX fees (they mine on liquidity).

    This means: you can provide a trading pair, e.g. ETH-USDT or ETH-DFI to a DEX (e.g. uniswap or defichain) and earn from the fees and rewards the DEX and underlying blockchain creates. It depends on the trading pair, but APY up to 200-300% are possible. This is insane!

All in one Service

As a go-to service I like cakedefi.com. After deposit, you can send your coins to work in one of the three above scenarios. Lending is called LAPIS there. At the moment Bitcoin or Ethereum earn a guaranteed 5% APY. Every batch is running 4 weeks, with a bonus up to 7.5% APY if the underlying asset is reaching a certain price range at the end of the batch.

Note, that company will take some fees from for the liquidity mining, but

  • You do not have to run a node (the DEX application) yourself and
  • You can stake master nodes with far less than running your own node (needs 1M DFI at the moment but will be reduced soon to 20k DFI)
  • Synchronize the blockchain, which takes quite a while as the transactions increase steadily
  • Manage your keys (this is obviously a risk, as you have to trust a third party)
  • Comparable to running bitcoin core on your laptop in 201x.

Use cashback on a Crypto Credit Card

There is second way to multiply your Bitcoin: Get a crypto credit card, use it in your daily life and get cashback in crypto currencies. Probably there are many providers for credit cards out there. However I do not trust each random backyard shack to give my ID card pictures and go through their KYC process.

Luckily the largest exchange for crypto currencies offers a free VISA card with cashback in their own coin: Binance!

With the Binance VISA card, you will earn 1% cashback on your spendings. You can increase the rewards by staking the Binance Coin BNB (see overview here) from 2% up to 8% cashback.

For me, staking 10 BNB (at this time around 600$) is fine (earning 2% cashback) but the next level with 50 BNB (or an equivalent of 3000$) is already to high to get another 1%.

For example, if you spend 10.000$ a year, you get 200$ in cashback payed in BNB to your Binance account. You can now hodl the BNB or swap to your favorite crypto currency to multiply your bitcoin.

Trading

The third way to increase your crypto supply is trading on a platform like Deribit. On Derbit you can only deposit Bitcoin and Ethereum. With equity in your account, you can start trading on the so called Futures (or buy options).

You can participate on increasing (long) or on declining (short) prices, depending on the kind of position you are opening. Please note, that futures trading is heavily leveraged. Gains and losses come very fast. Trading and leverage are an article, blog or book or lifetime learning itself.

At the moment I have have no final opinion on trading. I’m quite confident that profits are possible, but you also have to put in decent work. For hodling, the platform is not suitable. As you always have the risk of losing all your equity in the account in case the future price moves too far in the wrong direction.

Steven

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