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Here are 3 ways hodlers can profit from bull and bear markets

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For years, cryptocurrency advocates have touted the world-changing capabilities of digital currency and blockchain technology. But new projects come and go with each market cycle, and the promised benefits of these “real world use case” projects are not satisfying.

While the majority of tokens promise to solve real-world problems, few achieve this, and the others are merely speculative investments.

Here’s a look at the three things cryptocurrency investors can actually “do” with their coins.

loan

Perhaps the simplest use case offered to cryptocurrency holders is also one of the oldest monetary uses in finance: lending.

Since the launch of the decentralized finance (DeFi) sector in 2020, opportunities for crypto holders to lend their tokens in return for rewards have multiplied.

Blue-chip DeFi protocols like Aave, Maker, and Compound offer decent returns on stablecoins, and lesser-known protocols often offer higher rewards to attract liquidity.

Recently, the crypto lending space has expanded into areas typically dominated by traditional finance. This is especially true in real estate, where a number of experimental cryptocurrency-based mortgage and listing platforms are making strides.

Platforms like Vesta Equity and the newly launched USDC.homes offer crypto holders the opportunity to collateralize their wealth in order to obtain a mortgage or lend it to aspiring home buyers for long-term returns.

stablecoin farming

Another way to use the Hodl Bag is to farm stablecoins. The cryptocurrency market is known for its high volatility and high-risk trades, but earning a return on stablecoins is a sure-fire way to grow a portfolio without the downside risk of investing in Bitcoin (BTC) and altcoins.

Liquidity is required in bull and bear markets for DeFi protocols to function properly, and the integration of stablecoins on centralized and decentralized exchanges has helped the market mature and remain sufficiently liquid.

Platforms like Curve Finance, Beefy Finance, and Trader Joe offer returns on stablecoin liquidity pools, and rates can reach as high as 20% APY.

Related: Bipartisan bill to give CFTC authority over exchanges and stablecoins

Token offers with no loss

Another way to “use” cryptocurrency is by participating in the lossless token offerings that are being rolled out across the ecosystem.

An example of a lossless token offering is the parachain auctions that take place on the Polkadot and Kusama networks. This type of protocol introduction allows investors interested in supporting a project to lock DOT or KSM for a period of time as a form of security for the project.

Contributors will receive the native token of the newly launched protocol in exchange for locking their investment in the project’s smart contract. After the specified lock-up period, the total holding of tokens will be returned to the contributor, meaning they will keep their original holdings while adding new assets to their portfolio.

Lockdrops are another example of this type of lossless token offering. One was recently deployed during Astroport and Mars Protocol launches.

Lockdrops have also been referred to as airdrops because they don’t technically help projects raise funds, but require a certain level of commitment to future use by token recipients. While airdrops only distribute tokens to users who sign up, lockdrops require interested parties to commit to locking in some liquidity that can be used by the project during its initial launch.

Astroport’s launch included a novel liquidity bootstrapping phase in which contributors could provide liquidity pool pairs in exchange for a higher reward tier. After lockup, a one-time lockdrop reward is distributed to participants who can hold, trade or use to provide liquidity.

Liquidity providers also receive trading fees and other incentives, depending on the liquidity pool, to improve the opportunity cost of providing that liquidity.

Once the agreed lockup period has expired, users are free to remove the liquidity.

No-loss token offerings give long-term crypto owners the opportunity to earn tokens for newly launched protocols in exchange for returns and a choice of which token to accumulate as a reward.

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The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should do your own research when making a decision.