Bitcoin is one of the most fascinating currencies to have ever been created. Its unique qualities have captured the interest of many people around the globe, along with its meteoric rises in value over its lifespan. For these reasons, people often want to jump into the market. Generally, this happens by individuals outrightly buying Bitcoins, however, some prefer the idea of obtaining a loan for them so that they can increase their position or because they are currently low on funds. Let’s take a look at how you can do this.
Can You Get a Loan to Buy Bitcoin?
You can absolutely get a loan to buy Bitcoin, same as you can for buying other assets. It is a relatively common practice in the industry.
Can You Borrow Against Cryptocurrency to Buy More Cryptocurrency?
You can borrow against your own cryptocurrency to buy more crypto. This is known as leveraging, and it is offered by many exchanges. It is where somebody gains a loan on their crypto so they can purchase more Bitcoin and increase their crypto holdings. If their crypto investment is successful, then it will have increased in value more, but if it fails, then they can lose their initial crypto, which they would have used as collateral. Therefore, it is seen as a much more risky practice than traditional trading.
The Best Loan Options For Buying Bitcoin
Let’s take a look at some of the top options for getting a loan to buy Bitcoin.
Ledn's B2X
B2X is a service offered by Ledn, where you gain a Bitcoin-backed loan to double your Bitcoin holdings. It essentially allows you to use your Bitcoin as collateral to receive a fiat loan. The original Bitcoin, along with the Bitcoin newly purchased with the loan proceeds, will serve as collateral for the loan. It is a highly popular option during bull markets, as the process of leveraging your own BTC to buy more BTC can yield significant gains if its price increases.
Personal Loans
You can seek a loan by simply asking somebody to lend you money for buying Bitcoin. Loans like this are typically much more informal, often organized by family or friends. Therefore, there are fewer rules with regard to how they function. Ideally, you and the lender would work out some sort of agreement, which would usually be verbal rather than written and signed (although this is not always the case).
However, just because they are less stringent does not mean you shouldn’t take them seriously– borrowing from loved ones can cause complications if you do not make an attempt to pay them back in any way.
Fiat-Backed Loans
Some services will let you collateralize your fiat in exchange for BTC. This is a simple process that works essentially as the opposite of a Bitcoin-backed loan, where your fiat is locked away as you borrow BTC from somebody else. When you return the Bitcoin, you will receive your fiat back. This is exclusively handled by CeFi services, as their DeFi counterparts cannot work with fiat at the moment, and many of them are also incapable of being compatible with Bitcoin.
Crypto-Backed Loans
Some services allow you to use cryptocurrencies as collateral so you can borrow fiat. This is where you hand over your crypto assets, which could also include stablecoins, in exchange for borrowing fiat currency. These are typically offered on CeFi services, as it is not feasible to work with fiat loans in a fully decentralized setting.
How To Get A Loan To Buy Bitcoin Step By Step
Let’s take a look at how to get a Bitcoin loan. We’ll use Ledn’s B2X service as our example, as their process is simple and straightforward.
Sign up to Ledn
Head over to Ledn and sign up to their services. This will require entering some personal information, purely so the company knows who their customers are.
Check Out The B2X Calculator
Go to Ledn’s B2X page and scroll down to find their calculator. From there, you will choose the amount of Bitcoin you want to double. For instance, if you choose 1.5 BTC, then you will be purchasing 1.5 BTC to double your holdings. Both, the original Bitcoin position and the newly purchased Bitcoin, will serve as collateral for the loan. Upon repayment, you will get 3 BTC in return.
Place a B2X Order
Once you have reviewed and agreed with the values shown on the calculator, click on Place a B2X Order. The transaction will be immediately carried out.
What Are The Risks Of Buying Bitcoin With a Loan?
Buying Bitcoin with a loan can be a great way of leveraging your position and making higher gains, but it is not without risks. B2X increases your exposure to the price of bitcoin. While you can benefit from any upside, you are also exposed to greater downside if the price of bitcoin decreases.
Bitcoin is a volatile and unpredictable asset. Even if you secure a loan for it during a bull market, there is no saying that it will continue to rise. If your BTC significantly drops while you have your loan, then you will be asked to deposit more collateral or pay down all of your outstanding loan balance. The fact that many Bitcoin loans work via leveraging means that the losses can be magnified significantly.
There are other risks to keep in mind, but this is definitely the most prevalent and commonplace.
Is It Worth Getting a Loan To Buy Bitcoin?
There is no definitive answer to this, as it will depend on what you are like as a trader, what your tolerance for risk is like, and what the state of the market is currently at. However, if you are not particularly averse to risk, and you believe the price of BTC will increase in the relatively near future, then it could absolutely be worth getting a loan for it. But if you are somebody who is apprehensive about the markets, does not enjoy risk, and are skeptical about the future of BTC’s price, then it may be ideal to stay away from this type of service. If you still want BTC, it might be better to simply buy it outright, as this will be no-strings-attached.
Why Is A B2X Loan The Best Option?
Ledn’s B2X loans are a favored choice by many for the simple reason that they help you to secure your position, whilst also increasing your potential for gains in a rising Bitcoin market. By leveraging your existing Bitcoin holdings to acquire additional Bitcoin, B2X effectively doubles your holdings.
It is a seamless process that allows you to acquire more bitcoin as well as secure a loan. While you could technically perform both actions separately, B2X is favored for the ease and simplicity that comes with simultaneously buying and borrowing. It is straightforward and fast, with both actions occurring in tandem.
This strategy is particularly attractive to those who are optimistic about Bitcoin’s future, and so they want to maximize what they can make. For those who have this level of confidence, it is a fantastic method of securing additional funds. Plus, it is extremely easy to obtain.
Conclusion
Getting a loan to buy Bitcoin is a common activity that is practiced throughout the industry. Whether that is on exchanges that let you leverage your BTC, via Ledn’s B2X service, personal loans, or even loans backed by other crypto, it is prevalent across the globe. The enticing nature of Bitcoin means that there are tons of people who want to maximize their potential gains by using a loan instead of just outrightly buying BTC. Of course, options like this come with their own risks, so you should be mindful before entering into such an agreement, but definitely consider it if the idea seems appealing to you.
Disclaimer:
This article is sponsored by 21 Technologies Inc. and/or its subsidiaries (“Ledn”) and is for general information, discussion, or educational purposes only and is not to be construed or relied upon as constituting legal, financial, investment, accounting, tax, estate-planning, or other professional advice or recommendation. Please read Ledn’s full Risk Disclosure Statement and Disclaimers.
