For years now, I've been able to stack ETH while still getting fiat to pay my bills. Means I don't need to sell right before a bull market. Why don't more people do this?

"I want to hold on to my BTC and ETH, but I need cash today."

Maybe this is a problem you've had in the past. Bull run feels like it's round the corner and it pains you to sell right now. So, what if I told you it was possible to pay for all these things without selling your crypto?

You can hold on to your ETH, but capture some of the future value of it now, instead of waiting for the market to catch up.

What if I also told you that, in many countries, there are significant tax advantages borrowing vs. selling?

This is the basic problem that DeFi borrowing can help with.

Why Take out a DeFi loan

You'd take out a crypto loan for the same reason you'd take out any other type of loan: to buy stuff. In my case, I've used DeFi loans to:

• Pay for my rent
• Buy my dad a new monitor for his birthday
• Take a trip to Barcelona
• Buy more ETH

The nice thing about doing this using a loan, versus just selling ETH is that, with a loan, you still have the chance to keep the ETH if prices go back up.

When you sell, you're done - you exit the position. As an example:

Say ETH is just below $2k. You sell, then 1 year later it's closer to $3k. The FOMO might hit you, because that ETH is now gone.

If instead you had taken out a loan, you could have *borrowed* the $2k, paid off the loan in a year, and still have the remainder of the value of the ETH remaining (~$1,000). (As mentioned, there may be tax advantages to borrowing instead of selling crypto in many countries).

This is why you see so many rich folks who consistently borrow against their assets instead of selling.

Of course there's a catch

It's not a free lunch, of course. You have to put down more ETH than you borrow (in USD terms), and this is used as a safety net for lenders in case the price of ETH falls sharply. You can lose that initial ETH if the price falls sharply - and this ensures lenders are covered.

The nice part though is that, unlike say a bank loan, you're fully covered at the point when you take out the DeFi loan - no credit checks needed, and nobody is going to come knocking on your door asking for their money back. You just wait until you're ready to repay, and then pay off the loan + interest.

I think really crucially, for those of us who share the conviction that this bear market is a temporary, this is really useful way to avoid selling at the bottom. I think it's on of the reasons why DeFi lending is so popular in crypto circles.

Bro, This aint new

I've had quite a few chats with folks on DeFi borrowing over the last few months. If you're like most people I've spoken to, you're probably thinking one of two things:

Either:

"No shit, literally everybody has heard of Aave and Compound, congratulations"

Or:

"I genuinely had no idea that was possible."

I think that second response underscores why I'm writing this post. If you're in the first group, you're well aware you can easily borrow stablecoins against ETH. Just looking at just Aave now and we can see hundreds of millions of dollars of stablecoins on loan, right now.

It's really clear that lending is widely used by *crypto natives* but, for some reason, this hasn't permeated into the mainstream.

What I've found from speaking to people about this, is that many people who consider themselves "into crypto" either aren't aware that DeFi Borrowing is available to them, or wouldn't consider it an option.

In the next post, I'll share some of my findings and thoughts on why DeFi borrowing is less popular, but in the meantime, I wanted to kick off a discussion:

Why have you, or haven't you taken out a DeFi loan?

Did you know you could?

Do you understand how to do it?

Would you do it if you could?

This is part of a series of posts I'm writing on one of the real world uses for DeFi - fiat borrowing. Full disclosure: I'm currently working on a platform that helps simplify the whole borrowing process in DeFi, but I'll try and keep the shilling to a minimum and hope these posts are useful. If you want to find out more about what I do, DM me or hop over to https://ambos.finance