To effectively use the lending system on Binance, here are the essential points to know:
1. **Crypto as collateral**: You must first provide a cryptocurrency as collateral.
2. **Repayment in kind**: When you borrow a cryptocurrency, you must repay the same amount that you borrowed, regardless of its price movement. For example, if you borrow 1 SOL and its price drops from $200 to $140, you will still need to return 1 SOL.
### Strategies to optimize your gains:
- **If you think the crypto will decrease**:
Put USDC as collateral, borrow the cryptocurrency that you think will decrease, and immediately convert it to USDC. When the price of the cryptocurrency has dropped, you can repay the loan with your USDC collateral while realizing a gain corresponding to the decrease in value of the borrowed cryptocurrency.
- **If you think the crypto will rise**:
Put up as collateral the cryptocurrency that you think will increase. Borrow USDC and use this USDC to buy more of the cryptocurrency used as collateral. Once the value of this cryptocurrency has increased, repay the loan with your collateral and sell the cryptocurrency to realize a gain. The advantage here is the leverage: if you have €1,000 and borrow €1,000, a 10% increase in the crypto will generate a gain on €2,000, which is €200 instead of €100.
- **Increase your borrowing capacity**:
You can borrow even more cryptocurrencies using the crypto you receive from the loan. For example, by exchanging the borrowed cryptos for the crypto used as collateral, you can borrow again. This strategy significantly increases your borrowing capacity, even if you start with an initial loan at 50% of the value of your collateral. With this method, you can reach up to approximately 100% of the value of your collateral.
### Important points to minimize risks:
- **Maintain an LTV of around 50%**: Although Binance allows borrowing up to 78% of the value of your collateral, it is advisable to maintain an LTV (Loan-to-Value) around 50% to minimize risks. This greatly reduces the chances of liquidation.
- **Monitoring the LTV**: If the value of your collateral gets too close to that of the loan (liquidation threshold at an LTV of 91%), you can adjust the LTV by adding more collateral. For this, it may be wise to keep a reserve of USDC to handle unforeseen events and avoid risks.
- **Diversification**: Do not place your entire collateral on a single cryptocurrency. Diversify your collateral and only invest a small percentage of your portfolio in these strategies to limit risks.
- **Only use major cryptocurrencies**: Focus on solid and established cryptocurrencies, such as BTC, ETH, BNB, or XRP, to ensure maximum security in your transactions.
This strategy is powerful for optimizing your gains, but it requires caution and good risk management. If you have any questions or would like concrete examples, feel free to ask me! 😊