If you are wondering how to borrow money to buy crypto, you are not alone. There are many reasons that a person would want to get into the world of cryptocurrencies, and that is why so many people have begun taking crypto investments more seriously.
Investments of any kind require careful consideration before jumping in with two feet. For that reason, this guide is meant to give you some actionable information to help you decide whether crypto investing is right for you and how you can get started, even if you do not have a large stake to get started with.
Why Get Involved In Cryptocurrency?
The list of reasons to get involved in cryptocurrencies is long, but we have put together a short list of some of the more common reasons that people have for getting involved in the world of digital assets.
1. Decentralized Monetary Concept
The first cryptocurrencies were developed to create a monetary system that had the power of traditional concepts of wealth without the governance and restrictions that those tools were known for.
The decentralized store of wealth is, and has always been, a driving force behind digital asset popularity.
2. Exponential Growth
Another attractive aspect of cryptocurrencies is the fact that no one knows just how high the valuation can get.
There are seasons for cryptocurrencies in which the values of the coins rise exponentially. Many investors are keen to be involved when that rise in value takes place.
3. Institutional Adoption
Institutional adoption of digital assets is yet another reason to get involved in the crypto current to markets.
Now that digital currencies are becoming widely accepted by banks, lenders, hedge funds, and many other big-name financial institutions, a new level of growth can be expected from cryptocurrencies in general.
We now have possibilities to borrow money using crypto, trade futures products based on crypto, and we are now seeing many companies accepting crypto as payment for goods and services.
4. Fewer Trading Restrictions
Another reason I crypto’s are quite popular is that there are fewer trading restrictions involved with buying and selling cryptocurrencies.
One example being the fact that traders can buy and sell crypto’s as many times as they wish, and as often as they wish, on any account size. This is great news for any traders who dread the PDT rule associated with stock trading on accounts lower than $25,000.
5. Transformative Technology
While there are plenty of other reasons to get involved digital assets, one final one that deserves a mention here is the fact that cryptocurrencies and block chain are transformative technologies that can very easily change the way we view money and live our lives.
Now, let’s take a look at how to borrow money to buy some Bitcoin.
BlockFi – Who Are They?
BlockFi is an interesting digital asset service that is a two-pronged approach to helping investors in the crypto space. The service provides high annual percentage yield rates for crypto savings accounts, and they also provide loans based on a person’s crypto holdings.
So, if you have crypto at the moment and would like to store it for long period of time while enjoying high APY, compounding interest, BlockFi would be a very good place to start.
Then, if you wanted to invest in a new up-and-coming digital asset that you believed could show exponential growth, you could use your crypto holdings in BlockFi to take out a loan in dollars with which you could buy another cryptocurrency.
How To Get Loans On BlockFi
To get a loan on BlockFi, the process is surprisingly simple and fast. Borrowers are able to take out cash loans that are backed by the borrowers crypto holdings. If the dollar value of the crypto holdings is $1000 from the borrower may take out a loan for $500.
The cryptocurrencies that can be used to back a loan with BlockFi are BTC, ETH, LTC, and PAXG. Loans with BlockFi are generally finalized within a few hours of starting the process and money is sent directly to the borrower’s bank account.
BlockFi fees are quite low. Borrowers are able to achieve APR rates as low as 4.5% which is better than loans from traditional financial institutions.
Robinhood – Who Are They?
Another option for buying crypto on borrowed money is the well-known stock market and trading app, Robinhood.
Robinhood is known for low fees and zero commissions for trading stocks and options. They are also becoming popular for trading cryptocurrencies. In fact, the zero-commission approach that Robinhood has makes daytrading cryptocurrencies cheaper on their platform than most others.
While many will certainly mention the lack of technical trading tools, the cost of doing business with Robinhood is hard to beat.
How To Borrow Margin On Robinhood
A Gold Account with Robinhood is required to trade with margin on the platform. Using margin for crypto on the platform is very much like using it for stocks.
Once users sign up for a Robinhood Gold subscription, they are given the choice to use margin for buying crypto.
There is one catch though. Cryptos are non-marginable assets on Robinhood. So, in order to use margin from a Robinhood Gold account to purchase crypto assets, there has to be enough money already in the account to cover the account maintenance. ‘Account maintenance’ is basically a cash cushion that an account must have when using margin to act as insurance.
If you are wondering why a person would use Robinhood’s margin feature to buy crypto since there would also need to be enough in the account (account maintenance) to buy it outright, here is a hypothetical situation to help illustrate a reason.
If an investor had $25,000 in their account but some of that money was tied up in stocks and other investment vehicles, the value of everything in the account would count towards the maintenance requirements. That is different from the actual buying power that an account has.
So, to gain instant additional buying power to purchase crypto, an investor could utilize the margin tools available within the platform to make the purchase desired. The only two requirements to do that are to be in Robinhood Gold and to have enough assets already in the account to back up the crypto purchase.
Robinhood’s fees are low and straightforward.
· Gold Account = $5 per month
· Margin interest rates for Gold members are 2.5%
· Commissions = $0
If you were looking for how to borrow money to buy Bitcoin we hope this helps you out. Both BlockFi and Robinhood are excellent exchanges that can help you leverage your buying power to buy more cryptocurrency. Just remember that leverage can be a double edged sword that can end up hurting you if not used correctly.