Need to buy something but don't want to sell your Crypto?

in #crypto3 years ago (edited)


Prices are lower than you expected them to be and as a proper Hodler you don't want to panic-sell low. You don't want to be in loss.

That's okay, I understand. After all that's our human nature.
Hope dies last, right?

Though at the same time you need or want to buy something and therefore you need Fiat (or even if you pay with Crypto you have to "buy at the current Crypto price"). Though the idea of liquidating now and losing your precious Zeroes and Ones is excruciating.

But what if I told you that you can keep your cake and eat it, too?

That's right. you can keep your Crypto and at the same time get fiat and buy something with it.
Heck, you can even buy more Crypto with it.

So what's the secret?

Collateralized Debt Position

Or CDP for short.

Essentially you can borrow DAI (Stablecoin where 1 DAI is 1 USD) by locking up some of your Crypto.

Or to bring it back to the "real world":

Imagine getting a loan from a bank where you provide your house as a Collateral.I f the house depreciates in value the bank asks you to pay out the loan (or provide more collateral). If you can't it auctions it to the highest bidder.

This is how CDP works, just on blockchain, with smart contracts and Crypto.

To give you a specific example:

  • You deposit 10 ETH where 1 ETH at the time of deposit is 100 USD.
  • Therefore, you have 1000 USD (or DAI) locked up.
  • Now you can borrow up to 660 DAI (USD) - or 6,6 ETH.
  • Once you repay whatever you borrowed, you get your deposit back.

In an ideal situation you'd deposit at a lower price, eg. 100 USD and then repay the loan at a higher ETH price (eg. 200 USD)

So for our example above, if the price of ETH would go up to 200 USD we'd need to repay 3.3 ETH (those 660 DAI) to gain back our 10 ETH that are now worth 2000 USD.

Now if the price of ETH goes down and it reaches the Collateral limit, then you'd need to pay out the loan or provide more ETH for collateral. Therefore it's a good idea to only use a percentage of your holding for this. And it;s best if you are a true believer hoping that the price will go up soon.

Surviving the bear market and holding your Crypto

So knowing all the above, what can you do to get some buying power and still hold your Crypto during the Winter period while waiting for the Spring?

I'll give you a quick list but before I do I just want to say few things

You can never know when the winter is over, how long it will be and how devastating it will be. And whoever thinks they know when it's over then they have been Fooled by Randomness (recommended read).

Secondly, there is a 2.5 % annual fee for keeping the CDP open so keep that in mind in case you'll need to Hodl longer.

Lastly, make sure you are a True believer as you can still lose your Crypto if you don't keep your CDN healthy (above the Liquidation threshold).

The Steps

  1. Get some ETH if you don't hold any.
  2. Create your CDP on CDP Portal (user friendly way of creating the Smart Contract)
  3. Change the DAI you borrowed to ETH
  4. Convert ETH to Fiat

That's it. Done.

Now buy what you wanted to buy and wait for the moon to get your Crypto back.

What are your thoughts on this? Would you try this right now?

What would keep you from trying it?

Let me know in the comments below.

Disclaimer: I haven't used this system yet as I didn't need Fiat that badly and just learned about this a few days ago (inspired by this


That's pretty much how guys from Paralelni Polis has dealt with dropping prices after fundraising in crypto at January 2018.

Yup, Got inspired by them. Though to be fair that article unfortunately is not "normal-people" friendly so I wanted to write my own take on it + think about pros and cons of this and do some math in my head to see if it's +EV.
And as always, to learn more about it :).

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