I've never shorted or taken out crypto loans, but you could theoretically:
- Take out a loan of USDT, using a stablecoin you trust as collateral
- Immediately trade all USDT into your stablecoin
- If the USDT price crashes, buy it up to repay the loan.
e.g. Binance lets you borrow 800k USDT with 1.23m collateral. Over 180 days, interest paid would be 36k.
Say USDT crashes and you repay your loan at 10c/USDT - you would pay at most 84k to settle the loan. You then end up with 1.94m, a 58% return on investment.
You can do it on a decentralized finance app like compound: deposit a stablecoin you trust (which could be USDC) and borrow Tether, then immediately sell it and put it into something else that earns interest, incl outside crypto. You continue to earn interest on the deposited USDC (currently .86%, Tether borrowing cost is 3.62%, all ignoring Compound rewards). You can borrow against 82% of the deposited USDC, but 70% would be better to cover the interest accumulating and possible temporary spikes in Tether value.
- Take out a loan of USDT, using a stablecoin you trust as collateral
- Immediately trade all USDT into your stablecoin
- If the USDT price crashes, buy it up to repay the loan.
e.g. Binance lets you borrow 800k USDT with 1.23m collateral. Over 180 days, interest paid would be 36k.
Say USDT crashes and you repay your loan at 10c/USDT - you would pay at most 84k to settle the loan. You then end up with 1.94m, a 58% return on investment.
It's probably not that simple however.