We continue from last week…
The beauty of lending Bitcoin is that you are exposed to very little price volatility because you only own Bitcoins for a short period of time – between the time you purchase the Bitcoin and the time it takes someone to “borrow” them for you on the Bitcoin lending exchange (they pay the market value of the Bitcoin, e.g. $100, plus some fees on top, which is what makes it so attractive for you as an investor).
Usually, large Bitcoin price movements take several days or weeks to play out, so you are exposed only to smaller price movements. If you buy $100 worth of Bitcoin on Monday, usually you’d expect to have most of it lent out by Wednesday, with the cash on its way back to you in your PayPal account, ready to be reinvested back into lending out more Bitcoin.
Here is an actual, real-life example from an account showing how much you can make in fees:
Using those fees, here are some hypothetical from a $1000 initial investment, which is loaned out ten times (reinvesting all the initial amount plus the fees, so that the investment compounds nicely). the PayPal transaction fee has not been included as that’s paid by the buyer.
Note: expect most loans to be in the $50-$100 range, as you should not lend the entire $1000 at once.
Not bad for just a few minutes per week of your time! By loan 5, we have already more than doubled our initial investment!
It is difficult to say how long it takes to loan out your full $1000 as it depends on the amount of borrowers at any given moment of time.
There is no such thing as a free lunch after all and there will be some risks involved. Apart from the risk that Bitcoin’s price could dramatically shift at very short notice, the other main risk is the fact that you are using PayPal- which in recent years has become riddled with scammers due to their crazy policies that favour buyers over sellers. This means that in the event of a dispute, PayPal will often favour the buyer over the seller. The third main risk is that the buyer can initiate a credit card payback via PayPal, meaning that PayPal will charge you a fee to cover their loss, even if PayPal sides with you in a dispute.
So for you the lender – you generate a low-risk, low-time commitment side income. How much and how often you invest is 100% your choice – if you need funds back, you can cancel your lending at any time, sell your Bitcoin and cash out.
For the borrower – they get to purchase Bitcoin via PayPal, without going through the time and hassle of using a Bitcoin exchange.
Next week, the most important part…How to I do this?
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