Market fundamentals you need to know before investing in cryptocurrency

investing in cryptocurrency

If you’re an intrepid investor but missed the crypto train in early 2021, you may just be taking a second look at the market.

Crypto assets have experienced an epic dip since May. Most assets have retraced 50% to 80% of their YTD peaks. A opportunity maybe to ‘buy the dip’?

If you are thinking of investing in crypto this post will help you learn the crypto market fundamentals before you take that leap. If you don’t know the market basics, you may be taking more investment risk than you’re aware of. You’re also investing uninformed, which in our humble experience never ends well. So read on wannabe crypto investors, and make sure you get to the end to find out the next steps you should take to invest successfully in crypto.

‘Coins’ versus ‘tokens’

Before we get into the crypto asset ecosystem, let’s talk about the difference between coins and tokens. This can confuse people when they’re first starting out. In short, coins are assets on their native blockchain. For example Bitcoin on the Bitcoin blockchain and Ether on the Ethereum blockchain. Tokens are assets foreign to the blockchain they live on. Examples are Tether which is a second-layer token on multiple blockchains.

In this article we’ll refer to all crypto assets as coins, but in some cases the use might be interchangeable with tokens.

Investing in cryptocurrency – market fundamentals

Fiat currency (USD etc) flows into cryptocurrency according to the market capitalization of different crypto assets. This is because investors typically enter a new asset class looking for the lowest risk assets in the class. Investors will generally also equate highest market cap with lowest risk asset.

Then, when the investor becomes more knowledgeable or informed about and comfortable with the investment space, they branch out. By understand how the crypto market structure impacts the flow of money into and out of crypto, you can make more informed investment decisions when you’re first starting out.

#1 Crypto price trends start with Bitcoin

Bitcoin is the highest market cap and lowest risk crypto asset (barring stablecoins). This is because it is the most well-known and has the greatest ‘trust’ or ‘authority’ score. Bitcoin dominates the total cryptocurrency market capitalisation by a long way and it leads price trends in the market. Because Bitcoin is the headline crypto asset – some say the reserve currency of the crypto asset ecosystem – money generally flows into crypto assets from the fiat money system starting with Bitcoin.  

Money flowing into and out of Bitcoin can have a massive impact on price movements in other coins.

#2 Money flows from Bitcoin into large cap Altcoins

Next, as Bitcoin investors become more informed about other crypto assets, they tend to diversify.  The money starts to flow from Bitcoin into large cap Altcoins (alternative coins to Bitcoin are called ‘Altcoins’). Large cap Altcoins are the top altcoins by market cap, led by Ethereum (ETH). As the money flows into these coins from Bitcoin, the price of this bag of coins can often move AFTER a Bitcoin move, with a lagging effect.

Bitcoin plus top 10 large cap Altcoins . On a macro level, fiat flows down the list by market cap.

Large cap altcoins are more volatile than Bitcoin and can even include some ‘shitcoins’ among them – meme coins like DOGE coin with little real utility or project value. This is a characteristic of crypto and something to be aware of as an investor. Crypto is not like other investment markets.  Market cap is not necessarily an indicator of strength, or value, or lower risk. It can equally be an indicator of sentiment and the kind of ‘social trading’ popular in crypto culture.

#3 The wild, wild west of small cap Altcoins

Finally, there are the small cap Altcoins. Money can often flow from large cap to small cap altcoins. These are the riskiest and most volatile crypto assets by far. They also bring the promise of the greatest investment gains. No risk, no reward hey peeps!

#4 Money also flows by crypto asset class

The other way that money can flow in crypto is in and out of different asset classes. The asset classes are generally grouped by crypto use cases. For example, the Stablecoins such as USDC and USDT that provide a peg to the USD as a safehaven from crypto market volatility. Non-fungible tokens (NFTs), Decentralised Finance (DeFI) and Oracles are well known asset classes. You can think of these classes as similar to the different industries you see in the stock market. Typically money flows in and out of assets by class in either a cyclical or ad hoc manner, meaning ‘like coins’ in the same class can move together. It’s common to have leading coins in each class (by market cap) and instances where pairs of coins with similar use cases move together.

Investing in cryptocurrency – how to track the money flows

If you’re investing in cryptocurrency you need to know about some critical ‘tickers’ or trading indexes, to help track the flow of money by market cap and use case. Keep an eye on these indexes and understand what each represents. They can help you understand what part of the investment cycle crypto assets are in, and therefore the near, medium and longer-term prospects for particular investments.

TOTAL

TOTAL is the ticker that measures total market capitalisation and the very first index to take a look at if you’re considering investing in crypto. This ticker will show you whether the total investment in cryptocurrencies is in an upward trend. If ‘the trend is your friend’ in investing, then this chart matters. It will help you understand both bullish and bearish macro views of crypto, based on what you see on the chart.

Here it looks to be forming a possible falling wedge on the daily chart, and could also be on the verge of setting a higher low after the February 2021 low. Or it could be in a major downtrend lasting for some time. I don’t have a crystal ball y’all – it’s more about making informed decisions.

Investing in cryptocurrency

Bitcoin Dominance (BTC.D)

Probably the most important index to understand and follow is Bitcoin Dominance (ticker BTC.D). BTC.D measures Bitcoin’s share of the total market cap of the cryptocurrency market. It’s a good idea to understand the relationships in movements between Bitcoin Dominance, the Bitcoin price and Altcoin prices. For example, when people are buying Bitcoin but the total crypto market cap is not growing, then Bitcoin’s share of that total market cap increases and the BTC.D chart goes up. This is bad for Altcoins in general because it signals that Bitcoin is outperforming them.

BTC.D moves the market

When people are buying Bitcoin (the trading pair BTC/USD is rising) but BTC.D is trending downward, this is generally because the total crypto market cap (TOTAL) is also rising. A rising tide floats all boats. This trend is good for ALT/USD trading pairs but less good for ALT/BTC trading pairs because Bitcoin is rising.

The movements of BTC.D fundamentally define movements and trends across the crypto market for different coins on all timescales. I personally wouldn’t invest in any cryptocurrency without first checking this chart.

TOTAL2

The next is TOTAL2. TOTAL2 measures the total market cap of all coins except Bitcoin. It’s a measure of the money flow into and out of Altcoins. TOTAL2 trending higher when BTC.D is trending lower is an indicator of what’s commonly referred to as ‘Altcoin season’. This is a time in the market cycle where you can expect Altcoins to outperform Bitcoin.

DEFIPERP

This is an index made up of a bag of the largest Decentralised Finance crypto assets. It uses a weighted average of the prices of DeFi crypto assets including KNC, MKR, ZRX, REN, REP, SNX, COMP, TOMO, RUNE, CRV, DOT, LINK, MTA, SOL, CREAM, BAND, SRM, SUSHI, SWRV, AVAX, YFI, UNI, WNXM, AAVE, BAL. It tracks the movement of money into DeFi as a proportion of the total market capitalisation.

Investing in cryptocurrency
TOTAL, BTC.D, TOTAL2 & DEFIPERP – understand and use all of them to make informed investment decisions

The final word – crypto is an ecosystem so take it one step at a time

There is a lot to learn about the crypto asset ecosystem. We’ll do our best here to spread the love with information we wish we had before we started investing. These basics will give you a shot at:

  • working out, based on how much risk you want to take, whether large or small caps are your cup of tea
  • what coin categories you might be interested in investing in
  • when is a good time to buy crypto based on how the money flows.

If you want to take the next step and start making money with crypto, then get yourself along to this entirely online Rich Dad Summit.

You’ll get 2 days worth of great investment content including successful entrepreneur and investor Robert Kiyosaki covering topics how to invest in Bitcoin and how to easily get around some of the beginner challenges with buying and owning crypto.

The cryptocurrency market is the wild west of investing so if your risk appetite is not up to investing in cryptocurrency then head over and take a look at some of our other traditional financial freedom investing ideas.

Until next post – have fun, be happy and do good!

Oh, and if you get value from our content please share the love!


How to buy the right dual income property

Dual income property

This one property investing strategy can make you financially free.

We’re not kidding. We’re talking about the wealth building potential of dual income property.

Dual income property has been a foundation stone of our financial freedom strategy so far. It’s a super wealth building strategy if you know what you’re doing. And the good news is you don’t need to stumble through.

Here’s the intro to this series to get things started.

Today, we take you through how to buy the right dual income property for financial freedom. At the outset, you’re going to want to know what your investment strategy is and what your investment objectives should be, because if you don’t how’re you going to meet them right? So let’s get started.

The dual income property strategy

Your initial investment strategy is buying low and upgrading the property for short term cashflow and capital growth, so you can continue your property (or other) investing journey. This is not the end of your plans for this property, but it IS how you’ll leverage it into another investment and keep on with your wealth building plans.

Buying low means you can preserve your own capital and will have some spare cash for upgrades. This bit is critical peeps! The value creation strategies we talk about below will help you take out equity as quickly as possible for your next investment venture.

Our full dual income property strategy will emerge over the course of this series .. I can just tell you are on the edge of your seats with anticipation 🙂

dual income property
Investing in dual income property can supercharge your wealth building strategy but you have to buy the right property

Investing objectives for dual income property

Positive cashlow

In our intro to this series we talk about the main benefit of dual income property being cashflow. So cashflow is going to be one of your main objectives because it’s relatively easy to achieve when you’ve got dual income. A cashflow positive property is when your annual rent covers all annual expenses and you have a little left over in your pocket.

So how do you work out if it’s cashflow positive when you don’t know what all your expenses are?

The 10% rule

The first thing you’re going to need to do is work out the gross rental yield for the property. From our experience and as a rule of thumb, with older properties you are looking for at least 10% gross rental yield to achieve a marginally cashflow positive property. One caveat – your yield percentage can really live or die on the condition of that property and its occupancy rate. We’ll get to that later….

Your gross rental yield calculations should follow this formula:

Property yield = annual rent / property price x 100

So for example, a $400,000 property with a gross rent of $40,000 will give you a gross rental yield of 10%.

This is a nice rule of thumb because it’s easy to work out when you’re hitting the pavement inspecting potential investment properties.

Properties that are less than 10 years old may have some worthwhile depreciation benefits for both the building and its fittings and fixtures. You can also use these benefits as a strategy to achieve a positive cashflow outcome. BUT peeps, the depreciation thing only works if you have complementary income you’re paying high tax rates on – like a high earning wage. If you’re looking at an investment that on the surface doesn’t meet the 10% rule, consider whether depreciation tax offsets against your personal income might get you across the line. If you want to learn more about this strategy, we recommend reading 7 Steps to Wealth by John L. Fitzgerald.

Newer dual income properties will come at a higher buy in price. This will mean a larger deposit, which may eat into your portfolio investment plans. It’s also hard to know with certainty before you buy whether this strategy will work with the specific property you’re targeting, unless you get a depreciation report done before purchase. Last we had one done it cost about $600…

Find property with low operating costs

We mentioned before that your holding costs and occupancy can really put a spanner in the works when it comes to positive cashflow. So if you want to find a property that is not going to kill your wealth building strategy with ongoing expenses. Here a checklist of things you want to see in a good property:

  • Brick veneer – external timber requires heaps of paint, maintenance and repair
  • Structurally sound with solid roof and stumps / slab
  • Hard wearing flooring – tiles, timber, laminate or planks. Tenants trash carpet and that becomes expensive.
  • Separate electricity meters for each unit or apartment – so the tenant pays their own power bills
  • Separate plumbing and good quality water efficient tap ware – if you have these you can pass on variable water charges, lowering your ongoing costs
  • A property on a single title – so you’re only paying the one city rates bill and not a rates bill for each unit. This one factor can literally save you thousands a year.
dual income property
Our dual income property – low maintenance, brick veneer on a single title, separate entrances, and separate electricity meters.

Capital gains

Now we’ve covered what to look for to land yourself some healthy cashflow, let’s talk capital gains. Your objective is always to get good growth no matter what kind of property investing you’re into right? But how do you know with a dual income property what growth might be on the table?

Organic growth – find the right location.

The right location will give you some good organic growth if you hold the property as part of your portfolio and look to leverage it as a financial freedom strategy. Now, there are a gazillion cities, towns and suburbs across Australia or America or even the UK and finding the right area is going to be up to you. Sorry!

Once you do get to a shortlist of locations, take a look at historic data over the last 10 and 5 years. You want a location with strong long term capital growth over at least 10 years. Strong is anything above 7% per annum. Depending on your time horizon, you also want that growth NOT to have all rolled out in the 3 years prior. This is because growth in property can be lumpy – where you might get a really good 24 months of capital growth and then a slow period of 3 years. If you jump in at the beginning of that slow 3 year period, you’re going to be waiting a long time to recycle any equity from your dual income property into your next investment.

Manufactured growth – find the right property

Manufactured growth strategies for dual income property differ massively from single family homes. Here is a checklist some of the things you want to look for, with a dual income property, based on your growth objective.

Cosmetic renovation opportunity – think purple, pink or orange wall paint, lace curtains, moth eaten carpet, overgrown garden. This is gold when it comes to easy to manufacture equity. A internal cosmetic renovation of paint, flooring, window coverings and some simple landscaping can help produce a higher valuation on the property AND increase your rent and your cashflow position.

Structural must haves – there are also somethings that the property must have to take advantage of manufactured growth opportunities longer term:

  • Carports or space for off street parking for each unit or apartment.
  • Firewalls between each apartment, usually constructed of Besser brick. You can check by poking your head into the ceiling cavity – they should extend up to the roof between each unit.
  • Separate entrances for each apartment or the ability to create them.
  • The potential to create separate and private outdoor spaces for each apartment.
  • Adequate (for the size of the building) stormwater drainage from the roof to the street.
  • You also want to make sure that each apartment in the property has separate electricity meters and separate water meters, or the ability to inexpensively separate them, and that you a buying a property on a single title.

We’ll cover why these things are important in part 3 of the series, but for now you’ll have to trust us – these are the thing to look for if you want a super charged strategy for financial freedom.

Where to find a low buy-in dual income property?

So if you’re still following along we’re at the bit in the story where we talk about where. Where do you find dual income property that lets you buy low and leaves you some cash to do upgrades, without blowing all of your savings on the one deal?

One of the major hurdles to dual income property investment for folks trying to build their financial nest egg is the buy in price or affordability. In tier 1 cities in Australia – like Sydney, Melbourne, Brisbane, Perth and even Adelaide – a dual income property comes in at a whopping $800k plus so you’ll need $100k plus in your pocket to buy. This just isn’t an affordable investment for a lot of people. It’s probably the same in the States or the UK… In some cases these price tags have already spilled over to tier 2 cities like Newcastle, the Sunshine Coast (well its not a city but you get the picture), the Gold Coast and Geelong

But.. in tier 3 cities (more like regional towns) you can still find dual income properties at affordable prices within a reasonable buy-in range. And the good news is that since the pandemic, tier 3 cities have become a lot more attractive for renters because of the lesser disruptions and impacts from shut downs, and for their affordability. We’d be looking specifically at towns within a 2 hour drive of a major city and with a population of 80,000+ as well as some diverse industries behind them to prop up employment. Think Cessnock in NSW, Toowoomba in Queensland, Devonport in Tasmania, Bendigo or Ballarat in Victoria. In these locations, dual income properties are still a possibility for many folks with a buy in price of $400 – $500k.

The final word – hey, hey you’re underway

In this post we’ve kicked off our dual income property planning with how to buy the right dual income property. Adding value peeps! We’ve set out:

  • a clear initial buying strategy – to buy low and upgrade so you can manufacture immediate cashflow and capital growth.
  • a checklist of what to look for when you buy – to maximise your property investment income and eventually the money you’ll make
  • some pointers on where you will find these types of properties.

Not all dual income properties are equal in the game of money financial freedom seekers. Buying a dual income property with these things in mind should help get you on the right track and on the fast track to crushing your financial freedom plans.

NFA – which stands for not financial advice (as opposed to NFI which stands for No F*cking Idea and is the opposite of what we’re all about here at the LLP).

Intro – The wealth building potential of dual income property

Part 2 – How to make passive income from property, double your money and pocket a 15% annual return

Til next post – have fun, be happy, do good!

The wealth building potential of dual income property

Dual income property

This is the intro post in our series ‘The wealth building potential of dual income property’. We own dual income property and it’s been a fundamental strategy in our financial freedom plan. We’re going to take you dear readers through the wealth building potential of dual income property using a bunch of different value creation techniques. You’ll get the real story, warts and all – not the BS sales pitch that real estate developers want you to believe. You’ll also get our tips from the trenches; we’ve made the mistakes so you don’t have to!

So if you’ve been wondering whether a duplex or triplex investment is right for you, read on financial freedom seekers.

What is dual income property?

To start you off, check out this little intro to dual income property on our Traditional FI page. In short, a dual income property is multiple apartments or town houses in one property, giving the owner more than one rental income stream. You’ll often hear dual income properties referred to as duplexes, triplexes or multifamily properties.  These are typically in a small complex or are semi-detached in that they share a common wall and some common areas. At the big end of town, they’re entire multilevel apartment buildings.

Dual income property
Our first property investment was this dual income property

Picking the right investment property for your financial freedom plan

There are two things about property investment that make it attractive as a financial freedom or wealth building strategy – capital gains and cashflow. When you’re looking for an investment property, it often boils down to a choice between the two.

Capital gains are the increase in the price of the property over time as the market moves (not all property increases in price while you hold it, we’re just saying that this is what you’re aiming for). If you’re aiming to build a property portfolio you can live off, you need capital gains to fund your deposit for future property investments.

Cashflow is generated from the rent your tenants pay you. You need this to be able to service future bank loans to leverage your deposit into more property.

There are also a couple of generalisations in the property market (which itself is a generalisation!) to know about when picking what property to invest in and where:

  1. City properties are capital gains properties – they tend to be more expensive, grow in price faster over time, and because of this they produce a lower yield
  2. Properties in smaller regional towns are better cashflow properties – they’re cheaper to buy and the yield is better, but there’s not the market demand to drive high price increases.

We’ve observed these generalisations in real life across different property markets around Australia, although there are always exceptions. Investment properties that give you both capital growth and cashflow FROM THE OUTSET truly are the holy grail of real estate investing. We say from the outset because if you hold an investment property long enough and pay down the mortgage it will inevitably produce some capital gains and you’ll be cashflow positive with rental growth and smaller loan payments….

Anyway…This is all good context to understand where you are at in your investments and your financial freedom planning, what you need to take the next step (cashflow or capital growth) and how dual income property it might fit in to those plans.

What is the benefit of investing in a dual income property?

Cashflow

Dual income properties are typically labelled a ‘cashflow play’ in property investment – because you get more beds, baths and kitchens than in a single-family dwelling. That leads to more rental income. Cashflow is seen to be the major benefit of dual income property investing and it’s what we focussed on when we were looking for a dual income property.

Income diversity

Dual income property gives you a couple of independent income streams. This is an important advantage over single family properties especially if you have a sizeable loan against the property. The thing with rental properties is, tenants vacate them. And when they’re vacant, your rent stops. With dual income properties, you can spread out the rental leases and the natural vacancies that occur between tenants and you always have rent coming in. Huzzah!

Value creation opportunities

The benefits so far are all around income generation. But dual income properties also have massive value creation opportunities and this is why we’re devoting an entire series to exploring how dual income strategies can catapult your wealth building and financial freedom! In terms of a property investment, multifamily properties are extremely versatile and can be a real blank slate opportunity for the motivated, active value creation type investor. Once you’ve set them up, they can also become low risk passive investment – all depending on how they’re run.

Building wealth from dual income property

So how do you leverage this type of property to build wealth? In our dual income property series we’re going to take you through the killer wealth building strategy that we used to pour rocket fuel on our dual income property investment – step by step dear readers.  Over the coming weeks, we’ll post about:

  1. How to buy the right dual income property
  2. How we turned a $60,000 investment into a $180 per week income and doubled our money in 12 months
  3. How to explode the equity in a dual income property – twice!
  4. How we’re killing it with our secret dual income strategy  
  5. Options to cash out from a dual income property

We’re going to take you through what we did, all of the numbers, our tips from the trenches at each stage, and we’ll even share photos along the way. We’ll also reveal some traps for the uninitiated and things we wish we knew BEFORE we got started.

The final word – is dual income property a good investment?

You’ll have to make up your own mind dear readers, once you read through this series and have weighed up the pros and cons yourself. Only you’ll know whether it’s right for you.

One thing to note upfront – dual income property is not an advanced investor strategy! Our first property purchase was a dual income property – before we bought our home! We were property novices – so if we can do it, you can too!

Stay tuned!

Part 1 – How to buy the right dual income property

Part 2 – How to make passive income from property, double your money and pocket a 15% annual return

Until next post – have fun, be happy, do good!

Investing in cryptocurrency – how much we made in one week with Celsius Wallet

Celsius crypto review
Celsius crypto

Can’t be bothered with all the crypto mumbo jumbo? Maybe some free money will make you think again about investing in cryptocurrency.

Who doesn’t love free money?

We’re going to share how we go and get ourselves some free money each week using the DeFi crypto app called Celsius. We’ll review the app – it’s features and safety and what we learned (and how much moolah we made) in the past week using the Celsius Wallet to earn passive income from cryptocurrency.

This is part 4 in our series DeFi: the new financial frontier where we explore DeFi crypto and the new rules of making passive money online. We’ll post links to Part 1 to 3 of our DeFi series at the bottom of this post.

What is Celsius wallet?

Celsius is a DeFi crypto platform that provides personal financial services – like banks do – but instead for investing in cryptocurrency. The company, headquartered in London, focuses on the financial services they say the big banks have forgotten about – fair interest rates, zero fees and fast transactions. Celsius have existed since 2017 but their service offerings have exploded over the last 12 months as more people enter the decentralised finance market to find banking alternatives to earn interest on their hard earned savings. The Celsius platform is now available to users in more than 100 countries around the world includ.ing Australia, UK, Canada – all the usual suspects

Celsius operates mainly through Celsius app, which is available for iOS and Android and is where you can access their financial services. Although it’s not strictly a crypto wallet, the app acts like a crypto wallet is some of its functions and features. We downloaded the Celsius app a week ago and started to use their services.

What can you use Celsius wallet for?

Earn interest on DeFi crypto and Stablecoins

This is the main reason we decided to give Celsius wallet a go. Frankly, we’re tired of earning zero percent interest on money in the bank. Low interest and growing inflation are a feature of the new money game in a post pandemic era. They’re also a big part of why financial freedom seekers need to get educated about the new rules of money and pivot with their financial independence strategies.

We transferred some crypto into the Celsius Wallet from other cryptocurrency exchanges a week ago. Here’s what we learned about earning interest on our crypto using Celsius Wallet:

Interest rates. Over the week we earned interest rates of between 5% and 13% across a number of different coins. Celsius calculates your interest earned every Friday and total interest earnings are updated each Monday. Every Monday, they also send you an email with the new rates that they are offering that week. That is another thing to know about DeFi lending products like the Celsius one; the interest you earn changes with the forces of supply and demand for that particular coin in the market (as well as some other factors). A free market for money lending not controlled by central bank dictated interest rates! What a novel idea.

Crypto coins and tokens – higher interest higher risk. At present Celsius wallet supports over 40 coins and tokens in their lending (interest) service. We earned rates as high as 14% during the week. We only lent crypto that we own with zero dollars in – which means that we bought the crypto previously, the price went up and then we sold a portion and took our initial investment out. This is part of our strategy to manage the risks of crypto price volatility. It effectively means we are earning interest of between 5% and 14% with zero risk.

Stablecoins – high interest, lower risk. The other thing that we lend on Celsius is stablecoins. We received an 8.8% APY on two different stablecoins – USDT and USDC. Earning interest on stablecoins is the lowest risk product on Celsius. This is because the price is not subject to the large fluctuations that other crypto can experience. You can learn more about stablecoin earnings here. There are no minimum deposits for Celsius, which is also a great feature if you want to test it out or teach your kids about crypto and financial freedom. We diversify our stablecoin lending across a few different stablecoins as another a risk management strategy.

Celsius price
CEL is the ticker for Celsius token. Hold CEL in your Celsius account to boost the interest rate you receive on Celsius app.

Flexible terms – get your coins out at any time. Now unlike DeFi crypto staking products that require you to lock your cryptocurrency into smart contracts or lending protocols for a nominated period, you can lend on Celsius with flexible terms. You simply follow the withdrawal process in the app, go through all of the in-built security features like 2FA and PIN code confirmation and enter the blockchain public key for the address you want to send your crypto to.

Like with any cryptocurrency transaction, you have to make sure the address is correct and you’re using the right blockchain network for the coin you want to transfer but this is pretty easy. For example, if we wanted to withdraw some ETH, we would log in to a crypto exchange like Binance or Coinspot, grab the correct deposit address generated from within that platform and copy and paste that address into the Celsius wallet withdrawal screen. Voila!

CEL token – The other thing to know about Celsius interest rates is how Celsius token works. Celsius has a token that they use to provide interest rate ‘boosts’ for ‘Celcians’ that use their service. The ticker is CEL and the token is traded on decentralised exchanges like UniSwap or on FTX. You can also buy CEL directly in the app but we don’t recommend this due to the fees charged by third party providers. You can opt to earn your interest in either CEL or in the currency you deposited. If you hold and earn in CEL you will receive a higher interest rate on your coins. The more CEL your hold as a percentage of your total holdings, the higher your earnings rate.

Celsius interest calculator. One of the best features of the app is their in-app interest calculator. You simply scroll to the coin you want to lend and put in how much of that coin you have. It then calculates your earnings over a week and a year.

Celsius interest calculator
Celsius in-app interest calculator

Why pick Celsius Wallet?

One thing about Celsius Wallet is that it currently offers one of the best rewards around for lending ETH or Ethereum. It’s not easy to find good flexible interest rates for ETH lending (where you can take your ETH out at any time) because staking ETH carries the condition that your coins are locked in the protocol until ETH version 2.0 is released. This could be in 2H 2021 but it might be also be later. If you have ETH, and don’t want to lock your coins in for an undefined timeframe, you can get 5-6% interest on Celsius.

Based on our research at the time of writing, Celsius also offered some of the most competitive rates for stablecoins around. We’ve used it and we know it works.

If you want to get yourself on Celsius and would love some free Bitcoin, just use our link and put in our referral code 1910143eb7 once you login in, set up your account. You can enter the code by going into your profile in the menu.

You get $40 worth of BTC for your first transfer of $400 in more. T&Cs apply but you basically just need to leave the $400 in there for 40 days. And who doesn’t want free BTC?

How does Celsius crypto interest work?

We find that people are automatically suspicious of the higher interest rates that you can achieve in DeFi crypto. A lot of folks think that all DeFi is just Ponzi schemes. It’s always good when it comes to your finances to approach new products with a good deal of caution and scepticism. And crypto is a literal minefield of scams and fraud. That’s why we’re here to report back!

So let us explain how Celsius offers the interest rates they do. Under the Celsius business model their rewards (interest) are funded by their lending business. They lend the coins that users transfer into the app onto hedge funds, institutional traders and exchanges, as well as other corporate partners. These partners deposit up to 150% collateral (in crypto) to secure the Celsius loan and they pay Celsius interest on that loans. Celsius also lends US dollars directly to app users – with digital assets as collateral – and earns interest from those loans.

The biggest risk in this model is very large movement (50% plus) in the underlying value of the coins used as collateral for Celsius on-lending. A large swing in the traded price of coins loaned by Celsius may initiate a margin call on the loan. If this happens, Celsius takes ownership of the collateral to secure its position (and yours!). The margin call process comes from traditional banking services but there is a different level of risk involved for borrowers because of price volatility in cryptocurrency.

A word of warning about borrowing crypto

Celsius also offers a borrowing product where you provide your own cryptocurrency as collateral to borrow either fiat currency (US dollars) or more crypto. You might ask – why you would borrow against your crypto? Well, its a form of leverage where you can continue to hold your crypto coins and have them move with market fluctuations but access value in them at the same time. You borrow coins to leverage your market return on those coins for example or put them to work somewhere in the DeFi system.

We don’t do this. We don’t use leverage when we’re investing in cryptocurrency because as we explained above we don’t want to be exposed to the risk of a margin call if there is a sharp drop in crypto markets while we sleep. This literally just happened in May 2021, and liquidated A LOT of leveraged positions across a number of large lending and borrowing protocols.

DeFi borrowing
Source: theblockcrypo.com
Is Celsius safe
Hodl security feature

None of this is financial advice dear readers – we’re just sharing our experiences. If you’re going to borrow or use leverage, that is up to you in the true ethos of crypto which is about managing your finances the way you want. It all depends on your risk appetite.

Is the Celsius Wallet safe?

The Celsius app has some great security features to protect your crypto. When you set up Celsius wallet you are required to set up an App Pin Code (like with your banking app) and provide your KYC or ‘Know Your Customer’ details. This includes name, address and ID document. Verification occurs within minutes and then you’re all ready to start earning, and borrowing.

BUT, before you do anything make sure you head into the menu and set up the additional security features for the App. This includes turning on their biometric security access if you use that feature on your mobile phone, setting up 2 factor authentication, and also setting up “Hodl mode’. Hodl in crypto language means ‘hold’ or stash your coins rather than trade or sell them. Hodl mode is an extra layer of security on withdrawals only. It prevents any withdrawals from your account without a separate PIN code. Remember to write everything down in a safe place peeps!

Celsius crypto interest
Our week 1 Celsius earnings

The final word

In our first week on Celsius Wallet we earned $19.90. That’s US dollars so around $25 Australian. Now it’s not enough to break the bank and make us rich, but all we did was download the app, set up the wallet and its security, and transfer some cryptocurrency and stablecoins in that we already had and was sitting around doing nothing. We also did it in a way that sought to manage risk. So if you are looking for cryptocurrency to invest in, have a look on the Celsius Wallet to see what coins they pay passive income on.

It literally took about 10 minutes to set up a little low risk cryptocurrency passive income stream of $100 per month. And Celsius wallet isn’t the only crypto wallet we use while investing in cryptocurrency. Across our different accounts, the passive income that we earn adds up.

We diversify across coins and across cryptocurrency wallets to manage risk and find the best yields. It’s just like not having all your eggs in one basket. We also don’t go for any of the leverage cryptocurrency investing strategies and avoid strategies that might have a high exposure to impermanent loss.

Like we always say, the fat stacks are out there financial freedom seekers. They’re not in the old money game you’re used to. These fat stacks require you to starting playing by the new rules of money. You have to take some risk and we’ve showed you how we’ve personally sought to manage our investment risk using this type of interest earning product. You also need to get educated. We hope we’ve helped you do that here today! If we have, please remember to use our links and codes – get yourself some free BTC and help out our blog too! 🙂

As always dear readers – this is not financial advice. Invest at your own risk and always do your due diligence.

DeFi series Part 1: The 2021 DeFi lowdown – time to pay attention peeps!

Part 2: The game of money is changing – so what is DeFi?

Part 3: How to invest in DeFi and earn double digit interest on your savings

Til next time, have fun, be happy, do good!

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