Bitcoin DeFi Lending Strategies on Liquidium: Here’s What Works!

Bitcoin is taking the DeFi world by storm, bringing you new opportunities to put your BTC to work. What's more, Bitcoin-powered assets such as Ordinals, Runes, and BRC-20s can now also be deployed to generate investment income in the Bitcoin DeFi market. 

Read on to discover a list of DeFi lending strategies you could explore on the Liquidium app. 

What Is Liquidium?

Liquidium is a Bitcoin DeFi lending platform that allows you to borrow or lend Bitcoin against Bitcoin Layer 1 assets, such as Ordinals, Runes, and BRC-20s.

In other words, Liquidium equips you with the necessary tools to do a lot more with your BTC and Bitcoin-powered assets than just simply holding them in your wallet. All of this you can do even without having to put your assets up for sale and keeping you in control throughout the process.

DeFi Lending Strategies on Liquidium

Liquidium offers two principal methods to use your Bitcoin assets: borrowing and lending. Each comes with its own tactics based on your investment objectives, risk appetite, and/or market situation. 

So let’s take a look at some of the most exciting Bitcoin DeFi lending strategies you can deploy on Liquidium.

Bitcoin Borrowing Strategies

Instead of selling your Ordinals, Runes, and BRC-20s, you can borrow BTC against them to further leverage up your position. 

Here are three examples of borrowing strategies you could try out on Liquidum: 

Leverage Your Position

Let’s say you’re bullish on the Ordinal Maxi Biz (OMB) collection. You’re currently holding 0.2 BTC and want to increase your exposure to OMB. This is how you could leverage your position:

1. Start small: Purchase one OMB using a portion of your BTC.

2. Borrow against it: Use that OMB as collateral to borrow additional BTC.

3. Rinse and repeat: With this BTC, get another OMB, which can then be used as collateral for more borrowing, and so on.

4. Set yourself a target: Keep the cycle going until you’ve reached your target. For example, this could be when you hit 5 OMB.

5. Realize your gains: If the price of OMB moves up, you can benefit from five times more exposure to it. When you want to exit, just sell the OMBs and repay the loans.

Essentially, this method lets you grow your gains by leveraging the possibility of using borrowed funds to buy more of the asset you need and then once again borrow against it. However, keep in mind that that notoriously volatile market can also move against you, so be careful.

Use Your Assets to Buy More Assets

Sometimes, an opportunity shows up in the form of a new Runes token or a fresh Ordinals collection. With Liquidium, you don’t have to choose between holding your assets and seizing new opportunities. Instead, you can do this:

1. Use your Bitcoin-powered assets, such as Ordinals as collateral.

2. Borrow BTC against your collateral to fund the purchase of the new asset you’re eyeing.

3. Purchase the new assets without selling the existing ones.

This strategy can be great for investors who want to have a degree of flexibility to keep up with a rapidly evolving market. By borrowing against the assets you’re already holding, you’ll have more capital to explore new projects without liquidating your current assets.

Hedge Your Positions

Borrowing BTC against your Ordinals, Runes, or BRC-20 tokens can serve as an effective hedge if you’re bracing for a potential drop in the price of these assets or simply want some downside protection.

• High loan-to-value (LTV) borrowing: On Liquidium, when you borrow against your assets at a high LTV (Loan-to-value ratio), your downside risk is mitigated in case the collateral’s price drops below the loan amount. 

For example, you borrow 80% of an OMB, which is worth 0.5BTC. So, you have 0.4BTC now. When you need to repay the loan, the price drops to 0.3BTC. In this scenario, you can keep the borrowed money and just default. 

Liquidium doesn’t use LTV-based liquidations, and your loan depends on whether you're able to repay it in time. 

• Default as a hedge: While defaulting isn’t a great outcome in traditional finance, in the DeFi area, it can be a strategic move to safeguard the borrowed BTC. On this platform, if you don’t repay your loan, your Ordinals, Runes, or BRC-20 tokens go to the borrower, while you get to keep BTC.

Hedging your positions is particularly useful if you believe that your Bitcoin L1 assets might drop against BTC and you want to use this opportunity to get more BTC. It also lets you hold onto your holdings while freeing you to engage with other assets at the same time.

Bitcoin Lending Strategies

Indeed, the above borrowing strategies entail some exciting ways to unlock the potential of your Bitcoin assets. That said, offering BTC loans to other users through Liquidium allows you to earn yield or even acquire assets at favorable prices.

Let’s find out how:

Grow Your BTC

If you’re looking to steadily grow your BTC holdings, lending could be one of the strategies to do so. Before you lend your BTC on Liquidium, there are some things to keep in mind:

• Lower LTV to minimize risks: It’s recommended to lend your BTC against assets you would be comfortable holding and which are more likely to remain stable against bitcoin. Then, set lower LTVs on them in the platform, thus minimizing the risk of default.

• Earn interest: As soon as the borrower repays the loan, you get interest on your bitcoin. As time goes by, this interest might add up, growing your BTC hoard without active trading or investing.

Doing this can give you a chance to boost your long-term BTC holdings.

Cheap Buy In

Looking to acquire an Ordinal, Runes token, or BRC-20 token at a discount? 

Liquidium can make this particular wish come true. Through its lending platform, you can make strategic loan offers that could result in a cheap buy-in in case the borrower defaults.

• After deciding on an asset, determine the price at which you’d be happy to buy it. Then, accordingly, set your LTV, which would establish how much BTC you want to lend relative to the collateral's market value. For example, if you want to buy Runes at a 50% discount, you set your LTV at 50%.

• Should a borrower default, you get the collateral at your desired price. If not, you get the interest.

It’s a creative, flexible, and potentially profitable way to take part in the market without actively buying or selling BTC and Bitcoin-powered assets.

In this way, you will be able to either gain the yield or buy the wishing asset at a discount. 

The Takeaway

With its innovative approach to DeFi lending, Liquidium offers plenty of opportunities for you to explore advanced lending strategies. 

To this end, it provides cutting-edge tools enabling you to deploy inactive BTC, Ordinals, Runes, and BRC-20 tokens in your wallets and create an alternative opportunity to build your portfolio. 

Nonetheless, each strategy carries a certain set of risks and rewards that you’ll need to weigh before making a final decision. 

For instance, leveraging your assets can maximize gains, but it can also amplify losses. Borrowing to hedge against a downturn might protect you in the short term but requires careful planning and understanding of market behavior. Lending offers the chance to earn interest or acquire assets cheaply but demands an accurate assessment of borrower risk and market conditions.

All things considered, the key to minimizing risks on Liquidium, as well as in DeFi in general–be it via lending, borrowing, or trading–is to stay informed, do your research, and never invest more than you can afford to lose. 

Connect your wallet to Liquidium to start growing your Bitcoin asset portfolio. 

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Always do your own research before making any financial decisions.

FAQs

Which app can I use to borrow bitcoin?

To borrow bitcoin, you can use the non-custodial, peer-to-peer lending platform Liquidium. As one of the leading lending apps in the Bitcoin DeFi space, its user-friendly interface and comprehensive suite of tools allow you to use your Ordinals, Runes, and BRC-20 tokens as collateral to borrow BTC.

What is DeFi lending in crypto?

DeFi lending in crypto is a decentralized financial service that enables users to lend or borrow cryptoassets without reliance on traditional banks or other centralized institutions. Some DeFi platforms, like Liquidium, support BTC and Bitcoin-powered asset DeFi lending, opening new revenue opportunities for you.