Lending Arbitrage with a Grain of SALT
Update May 31, 2018:
When this article was published the details were true at the time. As of today, we have seen some of the lending rules dictate how SALT can be used. We’ve also seen a huge decline in overall market cap likely reducing the number of folks looking to take out loans agains their BTC. Furthermore, the adoption of SALT was also delayed. All of this has led to its price decline. As of today SALT is trading at $2.05. A bargain from it’s $16 highs. I do not own any SALT.
…end of update May 31, 2018
The following was relevant in December 28th 2017:
If you missed the 18x returns on Bitcoin this year, or maybe the volatility of the cryptocurrency market has you a little gunshy to take big risks for big rewards. Well, let me tell you about another way to make a guaranteed 96% return on your investment er I mean loan.
I first learned about SALT Lending via research from Ironwood Research Group. Their insights had me in SALT long before it mooned. So, if you aren’t familiar, SALT Lending just launched their financial lending platform for Bitcoin & Etherium backed loans. This is a fantastic service for the many holders of crypto treasure chests who would love to find an easier way to leverage their new found fortune back in the real world. It’s pretty simple, you put up Bitcoin or Etherium as collateral and $SALT gives you a loan in USD. But here’s the awesome part.
SALT had an ICO and traded tokens to raise funding like any good startup. Their business model initially intended to use the tokens to pay for interest. Within the SALT system, tokens are valued at $27.50 (formerly $25). But, with the launch of the platform SALT announced they will accept the SALT token as payment for both interest and principal. Furthermore, they will accept the tokens at the full retail value. I’m assuming they are doing this to market their business and to get more tokens out of circulation back into their platform. They will resell them for $27.50.
So what does this mean to you? Well if you haven’t noticed $SALT is currently trading around $14–15 per token (at the time of this writing). Has the light bulb gone off yet? This means you can buy tokens for $15 and pay off a loan at $25. Simple steps:
- Buy $15,000 worth of SALT tokens on the open market
- Take out a loan for $25,000 from SALT
- Pay off the loan with your tokens (they only cost $15,000 but are valued at $25,000)
- Pocket $10,000 USD profit, ala arbitrage from a loan
So you do need to have some deep pockets to pull this off. IOW, if you are desperately needing a loan, this ain’t going to work for you. To get a loan with SALT you must put up 125% collateral in BTC or ETH for the loan amount. So in my prior example, you need to be able to float $46.2K to pocket $10K. eg: A loan of 25K needs collateral of $31,250 and you need $15,000 to buy the tokens on the exchange to repay the loan.
Feel free to add a zero to the above example depending on how deep the crypto-coins fill your treasure chest. Also note that as people catch on, the price of the SALT token is going to go up until it’s at or near $27.50. So if you haven’t purchased SALT, you should do so rightaway. Whether you want to get in on the arbitrage, hold some for future loan payments or just make some money flipping them on the exchange the upside potential is fantastic.
As always take this advice with a grain of SALT. YMMV. Doublecheck rules and policies. And, never invest more than you are willing to lose in high-risk markets. This is not investment advice!
You can setup your SALT account here: https://membership.saltlending.com/register?r=dm19d
You can find SALT on the BINANCE exchange. If you need to setup a BINANCE account, please use my referral link: https://www.binance.com/?ref=11175596
