Lending/Borrowing in Crypto: Simplified

I will tell you a short borrowing & lending story,

This strategy is actually incredibly logical, especially for individuals holding assets like Ether who need instant cash (USDT), especially during a bull market. It is one of the benefits of DeFi.

Let me explain it in simple terms:

Let's say 1 Ether is $2000 and you need money, for example, to buy a new jacket. You have 1 Ether. However, you believe that we are in a bull market, and Ether will go up, for example, to $5000, and you really don't want to cash it out.

The classic solution: sell Ether, buy the jacket, and pray Ether doesn't go up.

In situations like this, instead of selling your Ether, borrowing against it is a much more sensible strategy.

Instead of selling your 1 Ether, you take it to AAVE/or other lending platform and say, hey can I lend you my 1 ETH and borrow 1000$ for a short while?

You meet your needs, bought the jacket. Let's say you acquired $1000 USDT in some other way. You take that $1000 USDT to AAVE and say, "Hey, take my money,and now give my ether back"

Even if 1 Ether is now $10,000.

This way, you avoid the risk of losing money if the price of Ether goes up when you sell.

Couple Highlights:

1. AAVE is not a charity. For example, it lends USDT, and there is an annual interest, say 5%. So, if you delay this debt for a year, you'll have to pay $1050 USDT.
2. If the price of Ether crashes, for example, down to $600, AAVE will sell that Ether. (You get liquidated)

In short, this is it, learn to use DeFi to your advantage!