Dan Held Profile picture
6 Apr, 21 tweets, 6 min read
1/ [March Bitcoin yield update]

Over the last 23 months, I’ve earned ~1.7BTC with various yield generating services to earn an average of 5% on 30 BTC.

Note that I'll cover declining rates a bit further down in the tweet storm.

Here’s my journey and how to guide👇
2/ Here are the ways you can earn yield:

Lending (Easiest/most popular)
Yield: 3-6%
- Ledn: rb.gy/3nfhvx
- BlockFi: rb.gy/4wzpri

Covered calls (Harder)
Yield: 1-80%
- Deribit: rb.gy/zbkrlu
- LedgerX: rb.gy/b6dl1n
3/ Earning a yield enables you to stack more sats, or reduce the temptation to sell your coin through earning an income.

The yield you earn comes with RISK!

Below is my current allocation for March (will update MoM)

(yellow = changes)

docs.google.com/spreadsheets/d…
4a/ [Feb>March Changelog]

- Still staying out of covered calls. Dec/Jan freaked me out
- I wrote a long form article on the risks of lending Bitcoin which dived deep into the GBTC trade and how that might impact the market

danheld.substack.com/p/the-risks-an…
4b/ Rates⬇️

Both Blockfi and Ledn decreased rates, which is influenced by supply and demand. There is more supply of Bitcoin ready to be lent than demand so the yield decreases.

Some are holding up higher rates as a way to gain market share, especially in the 1 BTC tranche
4c/ I recommend everyone check out the Tweet threads by @MattBallen4791 from Genesis where he gave a good deep dive on what is going on with interest rates.

TL;DR - all rates will drop. Currently looking at around 2-3% for size (ex: 100 BTC)
5/ When I first started, I had 10 BTC in BlockFi.

BlockFi is a lending/borrowing platform where you can lend your Bitcoin out for ~6% interest. Much of this borrow is going to the GBTC arb trade, shorting, or the futures “cash and carry trade.” (for all lending platforms)
6/ Risk assessment: When you lend your coins to Ledn, BlockFi, etc. you have to trust that they’ve evaluated counter party risk properly, which includes:

- Financials of borrower
- Collateral requirements (typically 30-110%)
- Trading strategy
7/ As everyone knows, March and December were insanely volatile months. Here’s how they operated through the volatility:

- Deposits and withdrawals all processed normally (1-2 business days)
- “zero losses in the lending book”
- All of the products had near 100% uptime
8/ Note: there may be no benefits to diversification as you do not know the counterparty overlap between lenders (ex: BlockFi and Genesis).
9/ Note: I am not a fan of lending/borrowing services that have a token. There is no reason why you need a token as it introduces regulatory and structural risk.

Case in point: Cred blew up earlier this year.

cointelegraph.com/news/cred-cust…
10/ There are other ways to earn interest through lending, which include lending coins to exchange margin pools:

- Bitfinex: rb.gy/rdgbb4

What is beneficial about this method is you understand your counterparty risk.
11/ Lending is by far the easiest way for a regular trader to earn yield and at size if you’ve got more coin (ex: call strategies suffer from poor liquidity).

Next I’ll dig into covered calls👇
12/ What are “covered calls?”

It’s an option trade which has the owner of the underlying asset (“covered”) sell their upside above a certain price (“strike”) in exchange for a payment (“premium”)

The more likely that event occurring, the higher the premium (very simplified)
13/ So how does that look with some real numbers? (Pulled 4/6 split spread)

6/25 $75k strike = $6,170 premium (42% annualized)
6/25 $100k strike = $2,995 premium (25% annualized)

Annualized is a bit of misnomer -you don’t know what the yield will be the next time you sell calls
14/ Historically I’ve been selling 2-3x current price strikes 2-3 months out an earning an average of 4-6%

Because of how intense Bitcoin's bull run has been, I'm not selling any new calls for the time being.
15/ With covered calls you only have exchange custody risk, which is some of the lowest risk you can have.

One advantage of covered calls is that if you sell a 1yr+ duration call AND it gets assigned (price > strike) then your premium is taxed as long term cap gains (in the US)
16/ You can also earn a yield through trust minimized services like CoinJoins and providing lightning channel liquidity.

CoinJoins:
Yield: ~0.5%

Get started: github.com/JoinMarket-Org…

Lightning Pool
Yield: TBD

Get started: lightning.engineering/pool/
17/ Coinjoins allow for Bitcoiners to obfuscate their coin holdings through mixing them with other Bitcoiners. In order to create a market of individuals willing to mix, there are makers and takers. Makers post availability to mix, takers pay the makers for that convenience.
18/ Lightning Pool

Most simplistically, it is an order book for lightning liquidity (or a channel marketplace) done in a non-custodial manner (note: there is a coordinating server).
18/ Hope you enjoyed this thread!

If you haven’t already, check out my Google sheet where I’ve got all of this information available to you to play around with👇

docs.google.com/spreadsheets/d…

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More from @danheld

2 Apr
1/ "How to store your Bitcoin"

A thread👇

danheld.substack.com/p/how-to-store…
2/ I often get asked “How/where should I store my Bitcoin?”

This is a complex question that I’ve explored extensively over the last 8 years HODLing, but there are some simple ways to break down the solutions and pros/cons.
3/ There are two ways to store your Bitcoin:

Self-Custody: You take custody Bitcoin yourself, and have complete control over it. This means you manage your own private key.

Custodial: You trust a company like Kraken, Anchorage, etc. to store your Bitcoin/control the private key
Read 27 tweets
27 Mar
1/ Institutional adoption of Bitcoin

A thread👇

danheld.substack.com/p/institutiona…
2/ Meet the Institutions

Traditionally, “Institutions” refers to financial institutions, otherwise known as banking institutions, which are corporations that provide services as intermediaries of financial markets.
3/ These include: central banks, sovereign wealth funds, different types of banks (ex: commercial/investment), brokerages, and insurance firms.

In crypto, the word “Institutions” refers to those + hedge funds and corporates.
Read 21 tweets
25 Mar
1/ 🔔Update on my Bitcoin lending activities🔔

While I like @BlockFi and will continue to keep 1 BTC there, I will be moving my other 1.5 BTC over to @hodlwithLedn on 4/1 because they have a higher yield.

(BlockFi is reducing 1+ BTC rate to 2%)

platform.ledn.io/join/e2ac0411b…
2/ BlockFi's reduction in rate wasn't unexpected.

Interest rates fluctuate based on supply/demand/etc.

Most quotes I'm getting from other lenders are around 2-4%.

Ledn is at 6% which is on the upper end. Note: I don't think Ledn's rates will remain elevated for much longer.
3/ I'm announcing this so everyone has a heads up before I make this transfer. If this changes how you feel about a service you can make your move before me.

If you are concerned about the risks of lending, here are my thoughts on that topic👇

danheld.substack.com/p/the-risks-an…
Read 5 tweets
3 Mar
1/ [February Bitcoin yield update]

Over the last 22 months, I’ve earned ~1.5BTC with various yield generating services to earn an average of 5% on 30 BTC.

Here’s my journey and how to guide👇
2/ Here are the ways you can earn yield:

Lending (Easiest/most popular)
Yield: 3-6%
- Ledn: rb.gy/3nfhvx
- BlockFi: rb.gy/4wzpri

Covered calls (Harder)
Yield: 1-80%
- Deribit: rb.gy/zbkrlu
- LedgerX: rb.gy/b6dl1n
3/ Earning a yield enables you to stack more sats, or reduce the temptation to sell your coin through earning an income.

The yield you earn comes with RISK!

Below is my current allocation for February (will update MoM)

(yellow = changes)

docs.google.com/spreadsheets/d…
Read 19 tweets
20 Feb
1/ The Price of Bitcoin

- Why price is entirely what matters
- How the price helps build Bitcoin

A thread👇
2/ Marketing viral loop

“A viral loop is a mechanism that drives continuous referrals for continuous growth.

It’s how you drive your existing customers to refer others to your brand, and in turn, get those new customers to tell even more people about you." - @ReferralRock
3/ Most of us heard about Bitcoin in 2013, 2017, when friends and family were talking about the rapid price increase. It’s through this viral loop that Bitcoin grows in adoption.
Read 24 tweets
19 Feb
@RealJamesWoods 1/ Some argue Bitcoin’s distribution is analogous to a Ponzi scheme, but it’s nothing like one. The definition of a Ponzi Scheme: “a fraudulent investing scam promising high rates of return with little risk to investors.
@RealJamesWoods 2/ The Ponzi scheme generates returns for older investors by acquiring new investors.” It isn’t one for the following reasons:
@RealJamesWoods 3/ Returns

The Bitcoin whitepaper never mentions an investment or promising high returns. In a Ponzi scheme, the value for early investors rely solely on new entrants coming in with fresh capital, and their earnings/dividends come directly from this capital.
Read 9 tweets

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