If you are one of those chaps that believe bitcoin is a new asset class with a reliable, albeit volatile, long term boon due to the intractable irresponsibility of US government monetary policies, there is a strategy to use your bitcoin to make tons of free cash flow.

I cannot take credit for most of the ideas I recommend in my work, but commission-free DSTs and this strategy of turning your bitcoin into a passive stream of massive cash flow I can proudly claim as my originals.

Mind you, this will only work if bitcoin remains a long term growth asset.  If you do not have confidence in bitcoin’s long term growth prospects, this investment is not for you.

The strategy is to borrow at low rates against your bitcoin, and invest those funds in a bitcoin based call option writing EFT.  A call option writing EFT is an exchange traded fund that writes call options on bitcoin in exchange for cash flow in the form of options premium. 

In the options market there are traders that will pay a premium for the right to own your bitcoin at a higher price before an expiration date.  If the bitcoin goes up, the EFT keeps the options premium, plus the difference between the market price of the bitcoin at the time the option was sold and the strike price of the option, and delivers the bitcoin to the speculative trader.  If bitcoin trades sideways or goes down before the option’s expiry and does’t close above the strike price, the EFT keeps both the bitcoin and the premium.

Traders paying premium for the right to buy your bitcoin at a price higher than current market are betting that bitcoin will go up by a lot and they can control a significant part of it at the low price of the premium.  If it does go up so substantially, the trader gets the bitcoin contracted for with all of its appreciation, less the original strike price and premium paid.

Because bitcoin is such a volatile asset, the premiums are mind-numbing.  The Roundhill Bitcoin Covered Call Strategy EFT (YBTC) yield is 44.35% at the time of this writing, which is not unusual for this EFT.  That means that this EFT is making and distributing to their investors 44% of the value of their bitcoin  in the form of call premium.

Of course the price of YBTC is volatile because of the wild prices of its underlying asset.  However, YBTC does the best job of all other bitcoin call writing option EFTs at maintaining the fund’s net asset value.  That is, the price of YBTC is less volatile than their competition.

My strategy is to buy YBTC on bitcoin dips, where the YBTC NAV is relatively low.  I help maintain my cost basis in this investment by reinvesting YBTC’s substantial dividend back into YBTC when YBTC NAV is trading lower than my cost basis.  Then I cash flow YBTC dividends when YBTC NAV exceeds my cost basis.

While YBTC will never match the price gains of bitcoin, YBTC NAV will grow over time to consistently exceed my cost basis as bitcoin rises in price over time.  This is because the YBTC NAV will consistently grow by the difference between bitcoin’s market price and the higher price strike YBTC repeatedly writes calls on and gets premium from.

Eventually, given our thesis that bitcoin is a long term growth asset, the YBTC NAV will permanently rise above my cost basis, and I will receive consistent mind-boggling yield as long as bitcoin remains a long term growing asset.  YBTC will never match bitcoin’s parabolic growth rate because they’re exchanging bitcoin’s burst of parabolic moves for consistent premium.  But as long as bitcoin remains in a long term growth stage, YBTC NAV will exceed my cost basis, gushing the high yield cash flow.

I use the premiums to pay for the cost of borrowing against my bitcoin.  

I’m not investing in YBTC to capture parabolic bitcoin moves.  I own bitcoin for that.  I’m just using low cost bitcoin collateralized loans to make gushing long term yield against my bitcoin.

As of this writing, you can borrow the US dollar based stablecoins collateralized by your bitcoin for as little as 3.69% APY. There are both traditional finance brokerage firms, traditional finance crypto firms and DEFI platforms using reliable smart contracts available to borrow against your bitcoin.

The same strategy may be employed with other asset classes you invest in with confidence of long term growth, like gold-based (GLD, IAU), and silver-based (SLVO) option writing EFTs. I have more confidence in bitcoin and YBTC’s stable NAV option strategy management.

Of course prudence must be exercised in the amount of borrowed leverage to avoid liquidation risks on the bitcoin collateralized loan.

At Opes Trust | Shrewd Wealth Confidential we signal to our investors when to buy bitcoin, give step-by-step guides on how to borrow against your bitcoin at both traditional and DEFI platforms, and how to manage this investment to balance its yield vs. this investments NAV.  

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