How To Use Crypto Loans for Leverage

Would you like to purchase more crypto assets using leverage? By taking out a secure Celsius crypto loan, you can potentially multiple your returns using ‘good debt’.

Have you ever wondered how you can make a higher return on investment (ROI) without adding more fiat into crypto? One of the best and most overlooked ways to potentially multiple your returns is through the use of Celsius crypto loans.

As discussed in previous articles, loans can represent ‘good debt’ or ‘bad debt’. Obviously, ‘bad debt’ is getting a loan to go on a vacation or to purchase doodads (like extra clothes you don’t need or a boat you can’t afford). However, ‘good debt’ is when you take out a loan to purchase income or interest bearing assets (passive income) that can also increase in value over time (portfolio income).

Why Take Out a Crypto Loan to Purchase More Crypto Assets?

A Celsius crypto loan allows people to keep their crypto assets (no need to sell them) by leveraging them to obtain a loan, use the loan proceeds to purchase the same or other crypto assets, and then earn yield or reward interest on those assets.

In addition, you would only take out a loan if you believe that the asset that you are purchasing using the loan proceeds will appreciate MORE than the collateral asset. Otherwise, there is no point.

If your crypto assets appreciate over time (think longer term), then you will reap these benefits:

  • your asset collateral used for the loan may increase in fiat value
  • the assets that you purchased using the loan proceeds may increase in fiat value
  • the assets your purchased using the loan will continue earning yield or weekly reward interest

In addition, crypto loans through the Celsius platform gives you the added benefit of very low APR interest rates and 3 different loan-to-value (LTV) options. Interest rates can be as low as 1.00% or even 0.75% for Platinum Level users who pay the interest in CEL tokens!

APR1.00%6.95%8.95%
Platinum & paid in CEL0.75%5.21%6.71%
Gold & paid in CEL 0.85%5.91%7.61%
Silver & paid in CEL 0.90%6.26%8.06%
Bronze & paid in CEL 0.95%6.60%8.50%
LTV25%33%50%
* Please note that California, US and UK users can get 0% APR / 25% LTV loans for a limited time

We won’t go through the loan application process as it is covered here. However, we will discuss how Celsius crypto loans can be used as leverage to increase your stack and potentially your returns. As mentioned above, taking a 1.00% APR / 25% LTV loan is considered ‘low risk’ as it is a ‘secured loan’ with a lot of collateral used to back up the loan.

Here are several variables to keep in mind:
  1. Reward rates can change (updated weekly)
  2. Price of collateral used for the loan changes
  3. Price of assets purchased using loan proceeds changes
  4. Celsius loan rates change (but are ‘locked’ when your loan is approved)
  5. Assets remain supported by Celsius

*Please note that any collateral used to take out a loan DOES NOT earn weekly reward interest. This is the key to understanding what works and what doesn’t.

Ready to Use Our Calculators?

If not, skip this section and continue reading below for specific examples and explanations.

In-Kind Calculator

If you plan on taking out a loan to purchase more assets to earn in-kind rewards, then this calculator is for you.

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In-CEL Calculator

If you plan on taking out a crypto loan to purchase more assets to earn in-CEL rewards, this calculator is for you.

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How to Use Crypto Loans as Leverage

We’ll give you 2 examples of how a Celsius loan can be used effectively to provide increased yield and therefore returns:

Example 1: Taking out a loan to purchase a stablecoin

Example 2: Taking out a loan top purchase non-stablecoin crypto assets

Example 1: Take out a Celsius crypto loan to purchase a stablecoin

In this example, we will use the 6 lowest interest-bearing assets (ZEC, BSV, UMA, OMG, KNC and MANA) as of Summer 2021. Of course, these can be substituted with any asset for analysis.

Option 1: Earn In-Kind

In this first example, we will take a look at taking out a loan, purchasing a stablecoin and then earning in-kind. Here are the details:

  • 1% APR / 25% LTV crypto loan through Celsius
  • $1,000 loan using $4,000 crypto collateral
  • Purchase $1,000 worth of USDC (1,000 USDC)
  • Get 8.88% APY in-kind rewards (rewards in USDC)
  • Pay loan interest using USDC at 1.00% APR

Here are the numbers:

LoanIn-Kind
APY
*In-Kind
Equivalency
Stablecoin
In-Kind APY
Loan
Interest
Difference
ZEC-2.02%-8.08%+8.88%-1.00%-0.20%
BSV-2.02%-8.08%+8.88%-1.00%-0.20%
UMA-1.00%-4.00%+8.88%-1.00%+3.88%
OMG-0.50%-2.00%+8.88%-1.00%+5.88%
KNC-0.50%-2.00%+8.88%-1.00%+5.88%
MANA-0.50%-2.00%+8.88%-1.00%+5.88%
*In-Kind Equivalency = In-Kind APY * 4 (as a 1% APR / 25% LTV loan requires 4 times the collateral) -and- Difference = Stablecoin In-Kind APY minus In-Kind Equivalency minus Loan Interest

As you can see, 4 of the 6 lowest interest-bearing assets supported by Celsius have a positive (+) differential. What this means is that using $4,000 worth of ZEC or BSV to get a $1,000 loan to purchase $1,000 worth of USDC is NOT worth it as there is a -0.20% difference. However, using UMA as collateral gives you a +3.88% differential (you get 3.88% MORE USDC in in-kind USDC rewards). Even better, OMG, KNC and MANA will give you a +5.88% differential (which are the best options in this example).


Option 2: Earn In-CEL

We can also do a quick comparison using the option to earn in-CEL. We’ll continue using the 6 lowest interest-bearing assets for consistency. However, we will pay back the loan interest using CEL this time at 0.75% APR assuming Platinum Loyalty. Here are the details:

  • 1% APR / 25% LTV crypto loan through Celsius
  • $1,000 loan using $4,000 crypto collateral
  • Purchase $1,000 worth of USDC (1,000 USDC)
  • Get 11.21% APY in-CEL rewards (rewards in CEL tokens)
  • Pay loan interest using CEL at 0.75% APR

Here are the numbers:

LoanIn-CEL
APY
*In-CEL
Equivalency
Stablecoin
In-CEL APY
Loan
Interest
Difference
ZEC-2.53%-10.12%+11.21%-0.75%+0.34%
BSV-2.53%-10.12%+11.21%-0.75%+0.34%
UMA-1.26%-5.04%+11.21%-0.75%+5.42%
OMG-0.63%-2.52%+11.21%-0.75%+7.94%
KNC-0.63%-2.52%+11.21%-0.75%+7.94%
MANA-0.63%-2.52%+11.21%-0.75%+7.94%
*In-Kind Equivalency = In-Kind APY * 4 (as a 1% APR / 25% LTV loan requires 4 times the collateral) -and- Difference = Stablecoin In-Kind APY minus In-Kind Equivalency minus Loan Interest

By paying the loan interest in CEL tokens, all 6 of the lowest interest-bearing assets now give a positive (+) differential. However, both ZEC and BSV only give you +0.34%, which may not be worth the hassle. UMA gives you +5.42% while OMG, KNC and MANA give you an incredible +7.94% differential.

Example 2: Take out a Celsius loan to purchase a non-stablecoin crypto asset

In this example, we will use the 4 lowest interest-bearing assets (UMA, OMG KNC and MANA) and the 3 highest interest-bearing assets (SNX, MATIC and DOT) as of Summer 2021. Of course, these can be substituted with any asset for analysis.
Remember that you would only take out a loan to purchase other assets if you believe that the asset you purchased using the loan proceeds will appreciate MORE than the collateral asset.

Option 3: Earn In-Kind

In this third example, we will take a look at taking out a loan, purchasing a non-stablecoin crypto asset and then earning in-kind. Here are the details:

  • 1% APR / 25% LTV crypto loan through Celsius
  • $1,000 loan using $4,000 crypto collateral
  • Purchase $1,000 worth of non-stablecoin asset (SNX, MATIC or DOT)
  • Receive corresponding APY in-kind rewards (rewards in SNX, MATIC or DOT)
  • Pay loan interest using USDC at 1.00% APR

Here are the numbers for SNX:

LoanIn-Kind
APY
In-Kind
Equivalency
SNX
In-Kind APY
Loan
Interest
*Difference
UMA-1.00%-4.00%+13.99%-1.00%+8.99%
OMG-0.50%-2.00%+13.99%-1.00%+10.99%
KNC-0.50%-2.00%+13.99%-1.00%+10.99%
MANA-0.50%-2.00%+13.99%-1.00%+10.99%
*Difference = this only represents the difference in % APY reward rates. Both the loan collateral and SNX prices are variable (fluctuate with market) and therefore, it is impossible to predict the final ROI differential.

Here are the numbers for MATIC:

LoanIn-Kind
APY
In-Kind
Equivalency
MATIC
In-Kind APY
Loan
Interest
*Difference
UMA-1.00%-4.00%+10.51%-1.00%+5.51%
OMG-0.50%-2.00%+10.51%-1.00%+7.51%
KNC-0.50%-2.00%+10.51%-1.00%+7.51%
MANA-0.50%-2.00%+10.51%-1.00%+7.51%
*Difference = this only represents the difference in % APY reward rates. Both the loan collateral and MATIC prices are variable (fluctuate with market) and therefore, it is impossible to predict the final ROI differential.

Here are the numbers for DOT:

LoanIn-Kind
APY
In-Kind
Equivalency
DOT
In-Kind APY
Loan
Interest
*Difference
UMA-1.00%-4.00%+8.86%-1.00%+3.86%
OMG-0.50%-2.00%+8.86%-1.00%+5.86%
KNC-0.50%-2.00%+8.86%-1.00%+5.86%
MANA-0.50%-2.00%+8.86%-1.00%+5.86%
*Difference = this only represents the difference in % APY reward rates. Both the loan collateral and DOT prices are variable (fluctuate with market) and therefore, it is impossible to predict the final ROI differential.

IN SUMMARY: the % APY in-kind reward rate differential can be significant. You can potentially earn 3.86% to 10.99% higher APY by borrowing against your lowest interest-bearing assets to purchase the highest interest-bearing assets.


Option 4: Earn In-CEL

In this last example, we will take a look at taking out a loan, purchasing a non-stablecoin crypto asset and then earning in-CEL. However, just like in Option 2, we will pay back the loan interest using CEL this time at 0.75% APR assuming Platinum Loyalty. Here are the details:

  • 1% APR / 25% LTV crypto loan through Celsius
  • $1,000 loan using $4,000 crypto collateral
  • Purchase $1,000 worth of non-stablecoin asset (SNX, MATIC or DOT)
  • Receive corresponding APY in-CEL rewards (rewards in SNX, MATIC or DOT)
  • Pay loan interest using CEL at 0.75% APR

Here are the numbers for SNX:

LoanIn-CEL
APY
In-CEL
Equivalency
SNX
In-CEL APY
Loan
Interest
*Difference
UMA-1.26%-5.04%+17.78%-0.75%+11.99%
OMG-0.63%-2.52%+17.78%-0.75%+14.51%
KNC-0.63%-2.52%+17.78%-0.75%+14.51%
MANA-0.63%-2.52%+17.78%-0.75%+14.51%
*Difference = this only represents the difference in % APY reward rates. Both the loan collateral and SNX prices are variable (fluctuate with market) and therefore, it is impossible to predict the final ROI differential.

Here are the numbers for MATIC:

LoanIn-CEL
APY
In-CEL
Equivalency
MATIC
In-CEL APY
Loan
Interest
*Difference
UMA-1.26%-5.04%+13.30%-0.75%+7.51%
OMG-0.63%-2.52%+13.30%-0.75%+10.03%
KNC-0.63%-2.52%+13.30%-0.75%+10.03%
MANA-0.63%-2.52%+13.30%-0.75%+10.03%
*Difference = this only represents the difference in % APY reward rates. Both the loan collateral and MATIC prices are variable (fluctuate with market) and therefore, it is impossible to predict the final ROI differential.

Here are the numbers for DOT:

LoanIn-CEL
APY
In-CEL
Equivalency
DOT
In-CEL APY
Loan
Interest
*Difference
UMA-1.26%-5.04%+11.20%-0.75%+5.41%
OMG-0.63%-2.52%+11.20%-0.75%+7.93%
KNC-0.63%-2.52%+11.20%-0.75%+7.93%
MANA-0.63%-2.52%+11.20%-0.75%+7.93%
*Difference = this only represents the difference in % APY reward rates. Both the loan collateral and DOT prices are variable (fluctuate with market) and therefore, it is impossible to predict the final ROI differential.

IN SUMMARY: the % APY in-CEL reward rate differential can be even more significant. You can potentially earn 5.41% to 14.51% higher APY by borrowing against your lowest interest-bearing assets to purchase the highest interest-bearing assets.

In Summary

As you can see, leverage through crypto loans gives you the best of both worlds: keeping your assets whilst leveraging them to purchase additional crypto assets or stablecoins to earn higher reward rates.

This is only possible via Celsius crypto loans as their APR rates and LTV options are the best in the industry. As you’ve noticed, this strategy is not without risks, but they are ‘lower risk’ compared to other options.

If collateral asset reward rates increases and/or asset purchased with loan proceeds reward rate decreases, you can close your loan without penalty (minimum 6 months of interest must be paid). After closing the initial loan, you can apply for a new one using this strategy again based on updated reward rates.

Lastly, it only works by borrowing against the lowest interest-bearing assets to purchase the highest interest-bearing assets. This strategy works even better when earning in-CEL versus in-kind.