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1/ [January Bitcoin yield update]
Over the last year and a half, I’ve earned ~1.2BTC with various yield generating services to earn an average of 5% on 30 BTC.
Here’s my journey and how to guide
Over the last year and a half, I’ve earned ~1.2BTC with various yield generating services to earn an average of 5% on 30 BTC.
Here’s my journey and how to guide
2/ Here are the ways you can earn yield:
Lending (Easiest/most popular)
Yield: 3-6%
- Ledn: https://rb.gy/3nfhvx
- BlockFi: https://rb.gy/4wzpri
Covered calls (Harder)
Yield: 1-80%
- Deribit: https://rb.gy/zbkrlu
- LedgerX: https://rb.gy/b6dl1n
Lending (Easiest/most popular)
Yield: 3-6%
- Ledn: https://rb.gy/3nfhvx
- BlockFi: https://rb.gy/4wzpri
Covered calls (Harder)
Yield: 1-80%
- Deribit: https://rb.gy/zbkrlu
- LedgerX: https://rb.gy/b6dl1n
3/ Earning a yield enables you to stack more sats (what I’m doing), or reduce the temptation to sell your coin through earning an income.
The yield you earn comes with RISK!
Below is my current allocation for Dec (will update MoM)
(yellow = changes) https://docs.google.com/spreadsheets/d/1ZoapTCl76wahFMeNISSx9UdC3QBx-zC_jY4Le1H5Sdg/edit?usp=sharing
The yield you earn comes with RISK!
Below is my current allocation for Dec (will update MoM)
(yellow = changes) https://docs.google.com/spreadsheets/d/1ZoapTCl76wahFMeNISSx9UdC3QBx-zC_jY4Le1H5Sdg/edit?usp=sharing
4a/ [Dec > Jan Changelog]
- Still staying out of covered calls. Dec/Jan freaked me out
- Ledn dropped their rate 15 bps
- The GBTC trade is a popular reason to borrow, so it's likely some of my exposure is on that. Monitoring if it starts to trade at a discount
- Still staying out of covered calls. Dec/Jan freaked me out
- Ledn dropped their rate 15 bps
- The GBTC trade is a popular reason to borrow, so it's likely some of my exposure is on that. Monitoring if it starts to trade at a discount
5/ When I first started, I had 10 BTC in BlockFi.
BlockFi is a lending/borrowing platform where you can lend your Bitcoin out for ~6% interest. Much of this borrow is going to the GBTC arb trade, shorting, or the futures “cash and carry trade.” (for all lending platforms)
BlockFi is a lending/borrowing platform where you can lend your Bitcoin out for ~6% interest. Much of this borrow is going to the GBTC arb trade, shorting, or the futures “cash and carry trade.” (for all lending platforms)
6/ Risk assessment: When you lend your coins to Ledn, BlockFi, etc. you have to trust that they’ve evaluated counter party risk properly, which includes:
- Financials of borrower
- Collateral requirements (typically 30-110%)
- Trading strategy
- Financials of borrower
- Collateral requirements (typically 30-110%)
- Trading strategy
7/ As everyone knows, March and December were insanely volatile months. Here’s how they operated through the volatility:
- Deposits and withdrawals all processed normally (1-2 business days)
- “zero losses in the lending book”
- All of the products had near 100% uptime
- Deposits and withdrawals all processed normally (1-2 business days)
- “zero losses in the lending book”
- All of the products had near 100% uptime
8/ Note: there may be no benefits to diversification as you do not know the counterparty overlap between lenders (ex: BlockFi and Genesis).
9/ Note: I am not a fan of lending/borrowing services that have a token. There is no reason why you need a token as it introduces regulatory and structural risk.
Case in point: Cred blew up earlier this year. https://cointelegraph.com/news/cred-customers-demand-answers-after-platform-files-for-bankruptcy
Case in point: Cred blew up earlier this year. https://cointelegraph.com/news/cred-customers-demand-answers-after-platform-files-for-bankruptcy
10/ There are other ways to earn interest through lending, which include lending coins to exchange margin pools:
- Bitfinex: https://rb.gy/rdgbb4
What is beneficial about this method is you understand your counterparty risk.
- Bitfinex: https://rb.gy/rdgbb4
What is beneficial about this method is you understand your counterparty risk.
11/ Lending is by far the easiest way for a regular trader to earn yield and at size if you’ve got more coin (ex: call strategies suffer from poor liquidity).
Next I’ll dig into covered calls
Next I’ll dig into covered calls
12/ What are “covered calls?”
It’s an option trade which has the owner of the underlying asset (“covered”) sell their upside above a certain price (“strike”) in exchange for a payment (“premium”)
The more likely that event occurring, the higher the premium (very simplified)
It’s an option trade which has the owner of the underlying asset (“covered”) sell their upside above a certain price (“strike”) in exchange for a payment (“premium”)
The more likely that event occurring, the higher the premium (very simplified)
13/ So how does that look with some real numbers? (Pulled 2/5 split spread)
5/25 $75k strike = $3,900 premium (25% annualized)
5/25 $100k strike = $2,030 premium (13% annualized)
Annualized is a bit of misnomer -you don’t know what the yield will be the next time you sell calls
5/25 $75k strike = $3,900 premium (25% annualized)
5/25 $100k strike = $2,030 premium (13% annualized)
Annualized is a bit of misnomer -you don’t know what the yield will be the next time you sell calls
14/ Historically I’ve been selling 2-3x current price strikes 2-3 months out an earning an average of 4-6%
Because of how intense Bitcoin's bull run has been, I'm not selling any new calls for the time being.
Because of how intense Bitcoin's bull run has been, I'm not selling any new calls for the time being.
15/ With covered calls you only have exchange custody risk, which is some of the lowest risk you can have.
One advantage of covered calls is that if you sell a 1yr+ duration call AND it gets assigned (price > strike) then your premium is taxed as long term cap gains (in the US)
One advantage of covered calls is that if you sell a 1yr+ duration call AND it gets assigned (price > strike) then your premium is taxed as long term cap gains (in the US)
16/ You can also earn a yield through trust minimized services like CoinJoins and providing lightning channel liquidity.
CoinJoins:
Yield: ~0.5%
Get started: https://github.com/JoinMarket-Org/joinmarket/wiki/Running-a-Yield-Generator
Lightning Pool
Yield: TBD
Get started:
CoinJoins:
Yield: ~0.5%
Get started: https://github.com/JoinMarket-Org/joinmarket/wiki/Running-a-Yield-Generator
Lightning Pool
Yield: TBD
Get started:
17/ Coinjoins allow for Bitcoiners to obfuscate their coin holdings through mixing them with other Bitcoiners. In order to create a market of individuals willing to mix, there are makers and takers. Makers post availability to mix, takers pay the makers for that convenience.
18/ Lightning Pool
Most simplistically, it is an order book for lightning liquidity (or a channel marketplace) done in a non-custodial manner (note: there is a coordinating server).
Most simplistically, it is an order book for lightning liquidity (or a channel marketplace) done in a non-custodial manner (note: there is a coordinating server).
18/ Hope you enjoyed this thread! I fell down the yield rabbit hole and haven’t looked back :)
If you haven’t already, check out my Google sheet where I’ve got all of this information available to you to play around with. https://docs.google.com/spreadsheets/d/1ZoapTCl76wahFMeNISSx9UdC3QBx-zC_jY4Le1H5Sdg/edit?usp=sharing
If you haven’t already, check out my Google sheet where I’ve got all of this information available to you to play around with. https://docs.google.com/spreadsheets/d/1ZoapTCl76wahFMeNISSx9UdC3QBx-zC_jY4Le1H5Sdg/edit?usp=sharing
