Bitcoin Investment: Moving Up The Next Level

The Bitcoin (BTC) has recovered from its 7-day slide, eking out a 0.5% gain over the past 24 hours. Bitcoin is currently worth US$45,029.

That’s well under the record high of US$64,829, achieved last 14 April. It still expresses a gain of 55% year-to-date.

The Musk Impact

Even if Bitcoin’s recent woes can’t all be pinned on Tesla Inc (TSLA) founder Elon Musk, the world’s third-richest man has impacted the value of the world’s largest crypto.

Last week he stated that Tesla would stop accepting payment in Bitcoin. That aroused considerations that the company might sell some of the US$1.5 billion worth of the crypto it recently bought. He was bothered about the huge carbon footprint associated with Bitcoin mining, which uses almost as much energy as the entirety of Australia.

Musk has since moved to calm Bitcoin investor anxiety. He communicated that Tesla wouldn’t sell any of its Bitcoin holdings. But his company also won’t use it for transactions until the mining “transitions to more sustainable energy.”

Investing in Bitcoin remains a risky proposition. Bitcoin swings can be fast and furious. Outsized potential gains and equally significant potential losses often come in a matter of weeks or even days.

Bitcoin Investment 101: Lend Your Bitcoin For Interest

Yes, for those investors with a cast-iron stomach for risk, there’s the opportunity to earn a yield on your crypto holdings.

You heard it right; there are crypto savings accounts that will pay you interest on your borrowed Bitcoin.

bitcoin investment

As Bloomberg reports, various fintech companies will pay yields of 2–6% (or more) to borrow your Bitcoin.

Just don’t lose sight of the increased risks you’d be taking on.

Bitcoin investment can be a walk in the park. Firstly, the crypto you’ve lent out could fall hard over days without offering you any immediate recourse to sell.

Also, the interest you’re getting is paid in Bitcoin. So if BTC does fall dramatically while you’ve lent it out, the 2–6% interest you’ve received won’t be nearly enough to cover the losses.

Then there’s the creditworthiness of the fintech companies themselves. If you’re going to lend to any entity, whether you’re lending dollars or Bitcoin, you want to be pretty confident you’ll be getting that back along with interest owed.

Yet, the extra yield in today’s near-zero interest rate world is enticing a growing number of crypto holders to lend some out.

If you’re considering that, a veteran Bitcoin investor and analyst Dan Held has shared his thoughts (quoted from Bloomberg),

“Never risk your whole stack, and don’t risk what you can’t lose. These are private companies with no federal backing.”

Parker Lewis, head of business development at Bitcoin financial-services company Unchained Capital, echoes that sentiment. “If you do decide to lend Bitcoin, you better be able to quantify the costs because you’re trading the greatest asymmetry that has ever existed for counterparty and credit risk.”

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