Another crypto week has come nearly to a close, and it was a good one yet again. We had a spectacular rally over Memorial Day weekend last Sunday and the rally kept chugging right along until a hiccup yesterday but things have since stabilized.
Cheap money is hard to find unless you own bitcoin as a core balance-sheet holding. For accredited investors and eligible contract participants who pass AML-KYC, borrowing at virtually zero percent interest rates is a very real option.
You sell a risk reversal, or collar or fence, and line up the lending capital, and you’re on your way. Volatility is at extreme levels so when you sell a call you generate income. The put is bought to protect the lender, who is also protected because coins are in custody. The calls are much more expensive than the puts, depending on the strike, and that is how the interest rate on the loan is bought down. Even though the lender can receive 10% on their capital, the borrower effectively takes in cash for free – the call pays the yield. There’s a risk of losing the coin if the market explodes higher, which some aren’t fond of, but those risks can be managed, too. Market structure funds the loan – period.
The Fed doesn’t have the exclusive rights on lending cheap capital to borrowers; no, they do not.