DO YOU WANT TO KNOW A SECRET? The world’s wealthiest and most strategic investors can generate income from their assets without even having to sell them. How do they do it? By simply borrowing loans against their assets –– an option that crypto investors can now also opt for using Cake DeFi’s recently introduced “Borrow” service.
How does it work and how can you participate in it? Read on and find out.
- What is Borrow? Why Do Wealthy & Successful Investors Still Borrow?
- What is “Borrow” by Cake DeFi?
- How do Cake DeFi users normally make money with the DUSD they borrowed?
What is Borrow? Why do Wealthy & Successful Investors Still Borrow?
In Finance, to borrow is simply “to obtain or receive money on loan with the promise or understanding that it will be repaid.” For most people, borrowing is something negative as it creates debt or that it gives an impression that the borrower is in debt and has no other choice but to borrow money.
This is true, for some cases. However, nothing can be further from the truth for wealthy and successful investors who take advantage of this option.
Why do they still borrow money? Simply because they have two things that most of us don’t: assets (stocks, bonds, real estate etc.) and a line of credit for owning these assets. So, rather than selling assets - which is a taxable event - they use them as collateral to borrow loans and generate income for themselves, purchase a desired item and / or participate in other investing opportunities.
Simply put, borrowing allows wealthy and successful investors to not only retain their assets but also receive funds for sustaining their lifestyle and / or creating more financial opportunities for themselves. Not only that, this service is often offered at low interest rates and greater repayment flexibility - which makes it a truly attractive investment opportunity that no sensible investor will ever miss out on.
What is “Borrow” by Cake DeFi?
Similarly, crypto investors who do not wish to sell their crypto assets but want to receive funds to support their lifestyle or generate cash flow by using them as collateral can use Cake DeFi’s “Borrow” service.
What crypto assets can they use as collateral?
Borrowers can pledge DFI as collateral or combine it with Bitcoin (BTC), Ether (ETH), Tether (USDT) and USD Coin (USDC) (as long as 50% of the collateral is DFI). In return, borrowers receive the stablecoin DUSD - which is currently ranked in the highly-referenced cryptocurrency price-tracking website CoinMarketCap and is also listed on the DeFiChain DEX.
What is the benefit of borrowing DUSD?
Just like any other stablecoin, DUSD can be used to purchase items or, better yet, participate in other investment opportunities. In fact, a practical way to invest the DUSD borrowed would be to participate in Cake DeFi’s Lending, Staking and / or Liquidity Mining either directly or by swapping the DUSD into other coins.
What are the risks of using “Borrow”? Does it have certain limitations or restrictions?
Indeed, every investment tool has certain risks, limitations and / or restrictions attached to them. Users of Cake DeFi’s “Borrow” service, for example, should be aware that their collateral will be at risk of being liquidated If it drops below the 200% collateralization ratio.
To avoid this, borrowers should be mindful of the amount of DUSD that they are being allowed to borrow - which can be seen in real-time as they key in the total amount of collateral that they are willing to pledge.
Can borrowers convert the DUSD that they borrowed into other crypto assets?
Indeed, they can convert the borrowed DUSD into USDC or DFI without any conversion fee. However, conversion is no longer allowed once the borrowing process is complete and the DUSD appears on the borrower’s wallet.
It should also be noted that borrowers may only convert DUSD into USDC through the “Borrow” service, and that there are no other features available on the Cake DeFi platform that allows this action to take place.
Finally, this service can only be accessed through the Cake DeFi mobile app and is only available to those with verified accounts.
How do Cake DeFi users normally make money with the DUSD they borrowed?
Though none of the information or tips provided herein are financial advice, there are three known methods or strategies that users of the Cake DeFi “Borrow” service usually apply when it comes to making full use of the DUSD that they borrowed.
The first method is the simplest and most straightforward: withdraw the DUSD and sell or convert them into fiat or other digital assets via a preferred crypto exchange. The user may then use the fiat to purchase other revenue-generating assets or participate in other investment opportunities. They can do the same with the digital assets that they converted the DUSD into - depending on what it is, of course.
The second method is to re-invest the DUSD borrowed into the “Borrow” service by adding them into the existing collateral. Not only does this allow users to receive a new batch of DUSD but it also decreases the risk of their collateral being liquidated.
Finally, the third method is to something that we already mentioned earlier: invest the DUSD borrowed to participate in Cake DeFi’s Lending, Staking and / or Liquidity Mining either directly or by swapping the DUSD into other coins.
Why did we highlight this method again? It’s because this method, actually, allows users to use their rewards to top up their collateral. By doing so, they don’t have to top up manually.
There are other methods or strategies that users apply to make full use of the borrowed DUSD, and users may choose to combine or come up with new ones. Truly, the sky's the limit and you are free to decide how to use the borrowed DUSD to your advantage.
And that’s it! Thanks for reading this article. We look forward to seeing you “Borrow” your first batch of funds and generate cash flow for your investment activities soon.