Welcome digital asset news take your top stories in crypto currencial assets and bring them down to bite-sized pieces. So today we're gonna do a little bit something different. Instead of covering the news we're gonna cover something that's.
Gon na affect us uh very soon we're. Recording this video on december 27, 2020 and bitcoin has already breached the 28 000 mark. So we know there are good things coming, and the question that we asked in a poll recently was: what are you going to do with your crypto? When it goes, parabolic in 2021, 2021 seems to be our year seems to be when things are going to actually happen.
So what are you gonna do to advance yourself in your cryptocurrency portfolio, and there was four criteria we talked about. I'm, not gonna sell anything whatsoever, or i'm gonna take profits, whether that be a little bit or i'm going to totally cash out because i've got bills to pay the Next one was, i &, # 39 m, going to pay everything in crypto and just let everything ride and the last option was to take out loans and surprising to us.
50 percent of the votes stated i'm, not going to sell anything whatsoever and he's going to let it ride and that's. Fine, you can do that because who knows what it's going to be out like in the future? And maybe this is something that you are saving for your kids or grandkids, or something like that.
So sure we understand the next. The next most popular option was, i'm going to take profits. I'm going to cash out because i & # 39. Ve got bills and whether that be, i'm going to take 5 or all the way up to 100.
It just depends on what your situation is. So we kind of left that open and we got about 34 of people say we're going to do that now. The next one was, i'm gonna pay everything in crypto, and that could be the case.
But just so you know, if you pay in crypto, for goods or services, that's still a taxable event uh, especially the united states. Globally, it could be different, but in the us that's, how it goes the last option which was surprising to us, take out loans and only 10 percent of people said they were going to take out loans.
So we had to ask ourselves: what do people not know? What would people like to know and what i did is i tried to break it down and kind of, let you into my world about where i'm going to head as far as time goes on and what i plan to do with my Cryptocurrencies and digital assets, besides taking profits, which is going to be a large part of taking loans and the four things i'm, going to do so.
What we're trying to do in this video is, we might break it down because there's, so much information or we'll. Try to compress everything together just depends on how much information gets out there.
So if this isn't four parts, we & # 39, ll release it and let everybody know we & # 39. Ll, also put it into danteachescrypto.com our 100 uh free website. So let's jump into the computer and i can show you what i'm talking about.
So let's start. These are what i call the cash out alternatives. There's, a lot of different things that are out there, that we could do these just a couple things that i thought might interest you first up before we begin.
These are the things that i am personally doing. There are many options for what you can do with your crypto, but that's. What i'm doing your situation is different and this might not work for you. So don't.
Take this as financial advice, because everyone is different, all right, let's, jump right in so. First of all, this is going to be a video only on what to do with crypto loans. However, if you're, looking to just increase the value of your crypto portfolio, check out my videos on why i dca also called dollar cost averaging how to stake theta for passive income and how to stay cardano for again passive income.
Now you can find all these videos and a ton more at dan teaches crypto dot com that's. My 100 free website, where we help everyone understand cryptocurrency digital assets in bite-sized pieces. Also, you can gain interest on your crypto by just parking at a place like celsius or voyager.
You can sign up for them and see their rates, which vary from four and a half percent to eighteen percent and my handy-dandy exchange and wallet spreadsheet in the description below this video. Now, if you use links in the spreadsheet, you can get between 20-25 worth of bitcoin just for signing up, so it's all up to you.
So, okay, here's, the question: why crypto loans? What's? The point? Why not just take profits or completely cash out, like we talked about in the exit strategy, video? Well, you can do all that, but i'm just here to show you just some additional options.
So one of the big reasons for taking a loan on a crypto versus cashing out is that we don't want to pay capital gains taxes and taking out a loan based on our crypto holdings is not a taxable event. Let me just take a look right here: capital gains tax rates.
They have varied greatly. This is just the united states globally. They are wildly different from country to country, but we used to see a high of 35 percent back in the 70s. They have dropped off, but with new administration coming in, who knows what the capital gains tax rate is, and that's.
Just the federal government now remind you that if you're in america, you also have to pay additional state tax depending on where you live. So if you're in california, sorry, you got to pay additional 10 texas.
You got zero percent alaska, so on and so forth, but again in the us capital gains tax can be uh as high as 45 percent between state and federal. So we don't want to pay half of our gains to government.
Now. Look i'm all about paying what's reasonable and i'll. I'll always have to pay some taxes that's, just how it is, but i mean half half of everything i mean come on so before we move on. Let me briefly explain what is considered a taxable event now.
This is exactly what is a taxable event in the united states and most major countries. Your country may differ so check with your local laws, but this is from cryptotrader.tax and they beautifully laid out in four criteria, and this is really the nuts and bolts of it.
There's four times when there is a taxable event. The first one is. If you trade, crypto fiat, everybody knows that you got bitcoin, you sell it on some exchange, they give you some dollars boom. Taxable event.
The second one is trading one crypto for another crypto, and some people think well, okay, if i trade some bitcoin for ethereum, that's, a taxable event. That is true also if you trade any of your crypto for any stable coin, that's also a taxable event, so people when people say i'm going to put into a stable coin.
It's, not taxable. It's, not true. If you take any crypto, let's just say ethereum and say i'm, going to take my one ethereum, which is like 700 bucks a day, and i'm going to put into usdc that's. Taxable events, so you can't go around that the third one is spending crypto on goods or services, and this is something i've been guilty of, because there was a little snippet about elon musk talking about uh bitcoin to michael Saylor microstrategy and i said hey - this is great.
Now i can use my bitcoin and purchase that tesla i've always wanted and of course i was wrong. Maybe i can still do that, but of course it & # 39. Ll be a taxable event, because a tesla is a good so and, of course, any kind of services.
I do the same thing: it's, a taxable event and the last one is earning crypto as an income, and this could be if you're a miner, or this is going through. Legislation right now is as far as staking rewards.
If you get that for earning crypto's, income, that is probably a taxable event, so those are the four criteria. So i'm, doing actually two strategies to help me maximize. My crypto gains, as i believe in diversifying my assets, as well as any kind of wealth building strategies that i have so the first tax minimizing strategy is, i have a crypto ira with.
I trust this makes a part of my crypto totally non-taxable. Now you can find my explainer video in the description below the video you watch right now, and the link looks like this. It is about 20 minutes and takes you through the entire process.
Now this is really only for u.s residents. Only so just be aware of that, but the second strategy is, i'm. Going to talk about is loans against my crypto, and i put them into four types of investments.
Now these strategies, most anyone in almost every part of the world, can take advantage of, and i'll talk about them in detail in this video. But i need to make something very, very clear, and that is that when you take out a loan against your crypto, it is not a taxable event, but you must make the loan work for you and not the other way around.
So the money you take out must actively grow, so you can pay back the loan, because if you don't do that, what's? The whole point? You might as well just cash out and just take a crypt away and then also the value of your crypto that you have now is not the value it will be tomorrow or in a year or five years, so some digital assets will, i mean, go up 10 to thousands of times in value and then unfortunately, others will simply disappear.
So it's up to you to determine uh, which ones will actually appreciate and uh gain value. So to me there are really four ways that i am planning to use loans to buy, to put my crypto to work for me and those are uh airbnb uh buying houses put them in every amazon, fba businesses like franchise and self-start for existing and mortgage property Loans now i'm gonna break down those uh in four separate videos, because each one has their very specific use case.
And i'm, not going to do a video about exactly the specifics and fine details of how you would actually do this and run every single one. That would be impossible to do. They all have their own mastery.
But what i'd like to do in this video, is quickly give an overview of the four crypto loan platforms out there and what kind of crypto loan we're, going to need for each one of these types of loans that We're talking about for businesses, so these four crypto loan platforms are celsius, nexo, blockfi and crypto.
com. So a quick note before we start when you take out these crypto loans. Just remember that you must have sufficient collateral on what you borrow. So if your crypto value goes down, you're, going to have to give more collateral to cover the margin so be aware, and there are different criteria for each loans and they will all be affected by how much collateral you put in and your Interest rates that you actually get also, i'm.
Recording this on december 27, 2020 and bitcoin price has gone up all the way to 28 000.. I believe, personally, that the bitcoin price will be a bit more stable this time around thanks to large institutions, adding it to their treasury and holding like big companies such as microstrategy, galaxy, digital square paypal, and then you & # 39.
Ve also got the mass mutuals who are a multi-billion dollar company and then uh jefferies. We just came out another multi-billion dollar company, so they're, going to be holding these types of things and not selling.
So it's, going to stabilize the price and that's just for bitcoin. I i think with altcoins it's, going to be more of a fluctuation because of the more retail investors buying and selling. So we will see so, first of all, let's start with celsius.
Now you can do this on the celsius website on your desktop and you can do all the different calculations, but i find it very easy just to use my actual phone and actually things are a little bit more accurate there.
So when i click on when i go into celsius on the bottom right hand corner, i'm going to click on that and i'm going to go to. I want to borrow right in the center borrow, so i'm, going to click on borrow and what i'm going to do.
Is i'm going to say i'm going to apply for a loan, the top left-hand corner, and i want to borrow dollars and what's great about this? Is that you can put in how much you actually need choose your collateral and it's, going to give you an interest rate.
So let's just say for just for giggles. I need 500 bucks, so i need to choose a collateral, so it's, going to tell you all the different things that you do not have and that you do have that you can put up for collateral so like, and i'M going to pick one of those i'll pick ethereum.
Let me grab that so for ethereum. I have enough. If i wanted to grab 500 bucks, i can have a one percent, apr uh or almost four percent or eight percent. What's, the difference? Well, the difference is, is how much you actually lock up as collateral the more you lock up, uh the lower your interest rate will be so if i want to put up almost three ethereum and right now it is december.
27 2020 ethereum is around 700. So if i lock up about three that's about two thousand dollars, so i have to four x the collateral to get a one percent apr. That is just how it is, and then, if i wanted to just uh, you know four percent apr.
A little bit less and then, of course, if i wanted a very high apr of eight percent, all you do is just lock up double what i need so instead of uh, i need 1.47 that's about a thousand dollars to get 500 bucks.
Okay, so that's, what i know so let's, go back! Let's just say. For example, i need fifteen thousand dollars. I need at least four x to get the best interest rate. So i choose the collateral and you know if i had enough uh bitcoin it would.
It would tell me here this is just an example. So if i want one percent apr, i'd, have to lock up 2.2 uh bitcoin right now. Bitcoin's around 20. 8. 000. 27. 000.. So you're. Looking at you know, 4x of what you actually need to actually put it in, and here's, the thing as far as like collateral for loans for each of these places, you have to make sure that you keep the same margin.
So if, for some reason, bitcoin goes from 28 000 to 20 000, i'm gonna have to uh, put in more bitcoin to keep my loan active. If not, they will liquidate it and then off i go, and this is for every single type, cryptocurrency loans.
So that is how it works for celsius and the great thing about celsius. Is that let's just say: i want this four percent now. What's great about this? Is i can choose between 6 12, 18, 20, 20, 30, 36 months so up to three years, so that's great.
If i want to lock in that rate, because who knows what's? Going to happen after three years now, i've already talked to the head of the department for loans, and i said well what would happen if i need for a longer term, let's say i need it for five years or Even 10 years - and she said well, we can't lock it in.
We can't lock that right in, but it should be about the same, which i i can't totally agree with that. But okay. So i will just tell you from my experience that out of the four uh between celsius, blockfi, nexo and crypto.
com, this has the longest term of 36 months. That is the longest that they have and everything else is about a year. They can keep going after a year, but again not for sure if the same rate applies. So that would be a little bit tricky, especially as time goes on.
So just remember these rates and these terms, as we start to talk about airbnb, amazon, fba, business, startup and mortgage loan payments, so all right that's celsius. Now let's. Take a look at nexo, so nexo.
I have an account there myself and nexo is pretty good. They've been around for for quite some time and their their interest rates only start at uh, 5.9 percent, so a little bit higher than what celsius has and the way that they do.
This and where they determine it, it's, not how celsius has it where celsius has it by you have to collateral uh different cryptocurrency. The thing that nexo does is it's all based on the amount of nexo tokens that you have in your portfolio.
So if you have a thousand dollars, then, if you have up to ten percent of uh nexo tokens uh, then you & # 39. Ll, get the lower interest rate same thing with uh gold. If you have between five and ten percent it's.
8.9, if you have one to five, you have 10.9. If you have only up to one percent or lower, your interest rate is going to be uh almost 12. So the only way this really works pretty well is, if you have a ton of nexo, and you want to borrow against it me personally, i have no nexo.
I don't plan to invest in the nexo token, so this isn't an option for me, but it might be an option for you as far as like, but remember 5.9 isn't that great so just letting You know about that. The next one is block five, so block fi, i think, is one of the worst ones from what i can gather.
This is from their help center and they state our loans are structured for a term of one year and 12 months and that's. It so after that, and you know, nexo is pretty much the same. They can roll over.
But again it's at 5.9 percent, so with uh block five, it's one year terms, after that they can reset the terms whatever the interest rate is, but uh here's, the example uh they used for a Client taking just a ten thousand dollar loan, just ten thousand bucks is all you need.
If you want a nine point, seven five percent interest rate, which is the highest that they have, which is no good uh. You're gonna need about twenty thousand. So again, just like we saw with uh celsius, it's, going to be pretty high if you just have collateral, which is double what you need now, if you want a 7.
9 percentage rate, you need 33 000. So you need to 3x that and then the best interest rate they can give. You is four and a half percent which requires 5x collateral. So again, if you want to take 10 000 to get a 4.
5 percent rate, you're, going to need 50 000 in crypto as collateral again, not the greatest option. But again that is another another uh piece of the pie out there. As far as block file and our last one is krypto.
com and real quick for crypto.com, i mean a lot of people love them. I just don't use them, but a lot of people do but for their loans. These are the rates right now. So just like we saw on the other three, if you uh deposit, let's just say, for example, 10 000: you can receive a credit of 5 000.
So if you have, you know 10 000, which is double what you need. You say i need 5 000 for a loan sure they can give it to you. But here are the rates and just like we saw with nexo, you have to have their krypto.
com or or crow token staked, and if you have 25 000 or more cro staked, then you can get an interest rate of eight percent and that's. Pretty much across the board, it doesn't, really matter how much you put in loan to value whatever else it's, just if you have 25 or more, they're, going to give you a straight eight percent.
If you have 2 500 or less cro, you're going to get 12 and to me those are awful awful rates. I would never use crypto.com for a loan. That just sounds ridiculous. So right now, as it stands again december 27th uh, the krypto.
com coin or crow uh is sitting around a nickel, almost six cents, so five cents times twenty five thousand. You're, looking at around uh twelve hundred dollars somewhere around thirteen hundred dollars somewhere around there, so that's.
How much you would need to get the eight percent interest rate, so that is the general overview of the fundamentals of crypto loans and the four platforms. Now there are other lending places and i welcome you to uh discover them all, but i just want to warn you be careful, because a lending platform called cred, which you can see right here - was all the rage not too long ago, but they overextended themselves in Some very bad markets and are now bankrupt, uh with people losing their collateralized crypto and actually, if you go right back to the website, it says to read about recent business activities: click here, you click there and they are in bankruptcy.
So all the people that had all their cryptocurrency on this platform - it is all gone now. So in truth, i mean i can only personally recommend celsius because i've used them for some time now and i & # 39.
Ve got 15 of my portfolio on the platform and i've, taken out a very small loan. Just to test it out and as well as the fact that i'm, also going to be taking a large loan with them for our new investment property in houston.
And actually that is what i did when i cashed out some of my bitcoin, which is a very small amount. I feel, and i'm, going to be using that to put that into the down payment of the investment property.
So so i know this video went a little long, so i'm, going to break it up and talk about using crypto loans for investment property purchases and leveraging the airbnb and vrb platform as a rental vehicle in our next video and over some Subsequent videos and go over everything so airbnb and vrbo me and my wife been doing this for years, and i'm, going to tell you all the pitfalls and issues as well as some best practices we went through as you can take the shortcuts.
I wish someone would have told me it would have been awesome so uh that'll, be pretty good video. I think all right, so that is it for today. So thanks for watching all the way in, i really appreciate it.
So let me know what you think of the comments below and i'll see you on the next one.