A carry trade is when a crypto investor takes out a low-interest loan and uses the funds to then invest in assets that attract higher returns. This trading strategy is becoming popular in the cryptosphere. However, the concept had already been applied to traditional fiat currency markets a long time ago. Nowadays, crypto nerds are using this method intelligently to make money. Here is all that you need to know about BTC and crypto carry trade.
Crypto Carry Trade and Low-Interest Bank Rates
Central banks across the globe are massively cutting their interest rates to allow more investors to buy assets. This strategy passively holds Fiat in the banks while stimulating the world’s economy. Financial experts are still debating whether this technique makes sense. One way to look at this trend is that with relatively low interest, traders will become more creative in finding ways to leverage these opportunities to their advantage.
The question is: how does the conventional carry trade operate? To understand this, you will need to review the history of carry trade financial strategies. Between 2004 to 2008, Japanese banks lowered their interest rates to about 0.5%. During that time frame, the United States’ Federal Reserve had conversely increased its interest rates from 1% to 5.25%.
When this happened, smart Japanese investors started borrowing the Japanese Yen to invest in the US Dollar. This combination of higher US interest rates resulted in the Yen weakening by 20%, creating huge profits for the early investors. A similar situation is now happening today on popular FinTech platforms such as YouHodler.
How Does the YouHodler Crypto Carry Trade Work?
Based in Europe, YouHodler offers really attractive interest rates — as high as 12% APR on stablecoins and other cryptocurrencies. It’s very easy to benefit from this scheme as a crypto investor. Here is exactly how YouHodler’s cryptocurrency carry trade works:
- Borrow Fiat currency, say the US Dollar or the Euro, at a very low interest rate. Deposit your funds into YouHodler. You can also decide to deposit Fiat to YouHodler without buying.
- Convert or exchange your Fiat currency to a stablecoin of your choice on YouHodler.
- At this point, you can start benefiting from your cryptocurrency savings account, which comes with a 12% interest rate. Beautiful, isn’t it?
Why cryptocurrency carry trade may be your best bet?
For people who are searching for high interest rates from their banks, they may have to accept the reality that good news won’t come anytime soon. Higher interest rates are not that common today. So, in the meantime, you may want to make the most out of crypto carry trades and low interest rates.
It may surprise you to learn that the Bank of England is seriously weighing the idea of negative interest rates. But, just when will you see that materialize? Well, the birth of this new idea followed the Bank of England slashing its interest rates to a historic 0.1% low, in response to the COVID-19 impact on the economy.
Under normal circumstances, this would be a disaster for people who were expecting good returns from their savings accounts. Nevertheless, today’s largely digital economy is fundamentally different. As a result, it’s possible to create new opportunities out of nothing. The era of cryptocurrency and blockchain technology has left central banks running helter-skelter with no authority in the financial ecosystem. Thanks to YouHodler Crypto Carry Trade, you now have a big chance to make money from the comfort of your home. You can now earn passive income, as and when you want without any hurdles. Indeed, it’s such a great time to be alive to witness the bitcoin revolution.