A basic Celsius strategy (in III Acts)
There are many ways to use the Celsius Network. Here is one of them.
Act I. Build up the asset base.
We all start from nothing. A new born Celsian starts with US$0.00 in their wallet. This needs to change. And quick. You are — first and foremost — going to acquire some CEL tokens. You want to maintain over 20.00% of your Celsius Wallet in CEL tokens (a 20% CEL ratio). That is Platinum status! And you deserve Platinum status. You are going to keep this Platinum status — for the benefits. I try to keep my CEL ratio at around 30%. Why? Well, crypto assets are volatile. Keeping your CEL ratio above 20% is easier when you keep it higher than 20%. What if the value of the other crypto in your Celsius Wallet increases quickly? Where does that leave your CEL token ratio? Yeah. Hopefully still over 20%. Next: you are going to keep crypto you intend to hold and accumulate in your Celsius Wallet. Move it over from other exchanges and wallets. You are going to opt to earn ALL earnings in CEL tokens (instead of in-kind) because doing so earns higher rewards, and you will also accrue more CEL tokens, which will come in handy for Act II.
Act II. Borrow cheap money instantly to help build up the asset base.
There are three Loan-to-Value Ratios (LVRs) you are able to apply when taking a loan from Celsius. They are: 25%, 33% and 50%. Ideally you would be using the 25% LVR to get a 0.7% APR on your loan. How low is that! Though, starting from scratch, you may have to opt for the 33% LVR or 50% LVR, which do come with higher rates, but it’s for an interest-only loan.
Example: You have US$10,000 in Bitcoin (BTC) in your Celsius Wallet. You opt to use a 50% LVR loan using the Bitcoin as collateral. The Celsius loan calculator tells us the following –
Loan amount = $5,000
Loan LVR = 50%
Loan APR = 5.67%
Monthly interest obligation = $23.63
Total interest payable (monthly interest x 12 months) = $283.50
At the end of the 12-months you will pay back the $5,000 in full. The total cost of taking out and paying back the loan will be $5,283.50
12-months in crypto. What could happen in 12-months? It is up to you where you invest that $5,000 you borrowed, but a 100% return after 12-months is VERY doable in the crypto markets. Let’s say you pulled that off. You will pay back $5000 from your profits and your asset base will have increased by $5000 (plus ALL the compounded rewards from this). Your only obligation for 12-months would be paying the $23.63 per month interest-only loan, which is discounted because you paid in CEL tokens. You have a bunch of these CEL tokens already from Act I. This is what you use them for.
What if you actually had $20,000 in BTC and you still took the $5,000 loan but with a 25%LVR?
Loan APR = 0.70%
Monthly interest = US$2.92
Total interest (monthly interest x 12 months) = US$35
At the end of the 12-months you will pay back the $5,000 in full. The total cost will be $5,035. Cheap money.
Some considerations: Yes, there is risk. Using leverage can result in profit or loss. Keep in mind how beneficial this arrangement is in cash flow terms. In the best case, paying $2.92 per month to have $5,000 at your disposal! This spells opportunity for the astute crypto trader/hodler.
How a Celsius loan works (once you have it).
You can borrow for a term of 6-months, 12-months, or 24-months. You pay interest-only for the duration of the loan. At the end of the term you will pay off the principal in full. Yes, you can opt to pay back the loan anytime just as long as you have paid (or will pay) a minimum of 6-months of interest payments. Being able to borrow cheap money on an interest-only basis will assist you with building up the asset base.
Act III. Have a goal in mind and make it a reality.
Two things to consider –
Your asset base target = X amount of USD ($)
Your APY income target = X amount in percentage (%) terms
Have a financial goal in mind with Celsius. My basic goal (for now) is to reach $US100,000 as an asset base. On this US$100,000 I’d like to earn an overall 8.00% APY paid as a weekly income. Is this a retirement plan? Not at all. Will this be F*** Y** money? Some of it. This is just a strategy to better myself financially.
Will I achieve the US$100k, or the 8% APY? I hope so. But even if I get half of that ($50k, 4% APY), I’d still be better off financially. It’s good to have exciting targets. They will keep you motivated.
Rinse, lather, repeat.
Proviso: Don’t put all your eggs in the one basket. This goes for your Celsius Wallet. This goes for crypto assets. This goes for real estate. This goes for your retirement fund. This goes for relying on a single job for your whole income. A decentralized world is just around the corner. Think and act accordingly.