Last Updated on January 27, 2025 by Olga
Holding Bitcoin in your crypto wallet allows you to steadily grow your capital as the value of the first cryptocurrency increases. However, you can put your Bitcoin to work and accelerate this growth, potentially earning more than by simply holding it. One effective way to do this is through Bitcoin lending. It involves depositing your coins on a Bitcoin lending platform, allowing you to earn money from them. But how did lending Bitcoin become a possibility? Let’s explore the evolution that made it feasible.
What is Bitcoin?
Bitcoin is the first cryptocurrency launched in 2009. It is the first real-life implementation of blockchain technology — a distributed database and a mechanism of consensus for its nodes that brought the following values into the concept of money:
- Decentralization. There is no single party like a government or a bank that can affect what is happening in the blockchain: it is controlled by all its members at once.
- Security and anonymity. It’s almost impossible to trace your crypto transactions and affect them in any manner.
- Inclusion and permission lessness. Everyone who has a phone or PC with an internet connection can take advantage of cryptocurrency. No permissions are needed.
- Immutability. It’s impossible to shut down a cryptocurrency without shutting down its decentralized network of nodes, meaning that you’d have to turn off the whole internet to stop a blockchain.
- Predictability. Traditional economies are lead by small groups of people with non-transparent decision-making. In Bitcoin, the rules were established once 12 years ago and have never changed since.
Initially, cryptocurrency was a passion of a small group of enthusiasts, but later, the general public has also seen the full potential of Bitcoin. New crypto projects emerged meant to outperform Bitcoin in terms of transaction speed and functionality; many platforms intended to expand the number of Bitcoin use cases.
One of such domains was finance: cryptocurrency gave people the chance to access financial services without the need for banks. This is how it became possible to lend out Bitcoin to get extra profits from this cryptocurrency.
What is Bitcoin Lending?
Bitcoin lending typically involves depositing BTC on a dedicated platform to earn passive returns. In its simplest form, you deposit your Bitcoin, and the platform generates interest on your holdings over time.
In this discussion, however, we focus on a more advanced strategy: leveraging Bitcoin as collateral to secure a stablecoin loan. These borrowed funds can then be reinvested into other platforms or digital assets to optimize your returns. While this method doesn’t align with the traditional approach of earning a fixed APR through Bitcoin lending, it offers enhanced flexibility for developing sophisticated investment strategies. This flexibility can potentially yield substantially higher profits compared to the conventional annual return of 5%.
Why is Bitcoin the Best Option for Lending?
In fact, many coins can work as collateral for lending. However, there are two important things to keep in mind:
- You should have a big enough amount to lend. In CoinRabbit, the minimum amount of Bitcoin you can lend is $100, but we encourage you to consider lending more to gain substantial returns. Since many users have the biggest part of their portfolios in BTC, we consider it the best crypto to lend.
- The asset shouldn’t be too volatile, and it should have a positive price prediction. This lowers the chance that your collateral will be sold and makes your deposit more secure. Bitcoin is an asset that many experts are bullish on; although CoinRabbit doesn’t make price predictions, we believe in the long-term value of Bitcoin.
How to find the best platform to lend Bitcoin?
Here are the criteria to choose the best place where to lend Bitcoin:
- Good interest rates: they shouldn’t be too high so that your investments could bring you profit. In CoinRabbit, you can deposit Bitcoin at 10% yearly interest.
- Your money shouldn’t be locked so you could withdraw them at any moment if you want. In our lending service, you can return your BTC deposit at any time.
- Speed. In CoinRabbit, you can deposit and start earning in about 10 minutes.
- Trustpilot rating should be good. We have 4.2 stars out of 5.0.
- The loan-to-value ratio has to be low enough so that your collateral doesn’t get sold when the Bitcoin price drops significantly. In CoinRabbit, we offer 50% LTV.
- The frequency of interest payments — if they are charged monthly or even weekly, this may be a bit annoying. In CoinRabbit, you only pay the interest when you withdraw your collateral.
- The need for registration and KYC. We value your privacy and don’t ask you to register and go through a KYC check. The only personal information you enter on our website is your phone number to be able to log in and track your deposit.
How to raise money by lending Bitcoin?
Here’s your first step — visit CoinRabbit and get a stablecoin loan:
- On the main page, use the calculator to estimate how much Bitcoin you want to deposit. As a loan currency, you can choose Ethereum-based Tether, Tron-based Tether, or USD Coin. After you’ve set the amount and the currencies, click “Get loan”.
2. Make sure everything is correct, and type in your address for the loan currency. Verify your phone number to access your collateral in the future. Click “Confirm”:
- Send your Bitcoin collateral to the address provided, and you will get your stablecoins in just a few minutes!
Now, you have some stablecoins — a cryptocurrency with a price pegged to the US Dollar, so it always costs $1. Crypto traders use it to buy time and think about what project to invest in next. When they put their money somewhere and everything goes well, they can withdraw and fix their profits in stablecoins.
Here’s what you can do with your Tether or USD Coin:
- Reinvest it in a cryptocurrency that you think will grow faster than Bitcoin.
- Put money in a liquidity pool in one of the Ethereum-based decentralized exchanges. By doing so, you provide liquidity to a smart contract where people exchange their funds and get rewarded in return. Uniswap is one of the most renowned DEXes with liquidity pools.
- Consider investing in yield farming protocols. Here, you can lend your stablecoins and besides interest, get some extra tokens like Compound or Maker.
What next?
After you did your thing by reinvesting your stablecoin, return to CoinRabbit and repay your loan. You can do it whenever you want — we have an unlimited loan period, so you can lend Bitcoin for several weeks, months, or even years. When you come back to return your collateral, you will need to pay the stablecoin loan amount + 10% APR + a transaction fee.
How can you lend Bitcoin with maximum returns?
Bitcoin loan can be especially lucrative in the stable periods when BTC isn’t growing fast, but many opportunities to earn money in different ways are around. We hope this guide helped you understand what Bitcoin lending is and how you can profit from it.
Stay tuned to our blog for more articles on investment opportunities!