Portfolio strategies for optimizing performance through strategic lending and borrowing in crypto
Optimize your crypto portfolio performance through strategic lending, borrowing, and yield farming techniques.
These strategies require a solid understanding of DeFi lending protocols, tokenized assets, and on-chain mechanics. Begin with foundational approaches before exploring complex yield stacking and risk layering.

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Core Strategies

Strategy: Amplify crypto exposure by borrowing stablecoins against your ETH/BTC holdings to farm yields or increase position sizeHow it works:
  1. Supply ETH, BTC, or tokenized assets as collateral
  2. Borrow stablecoins (e.g., USDC, DAI) up to a safe Health Factor threshold
  3. Use borrowed stablecoins to acquire more ETH/BTC or deploy into yield farms
  4. Continuously monitor liquidation risk and Health Factor
Benefits: Enhance exposure to crypto upside + maintain original holdings + unlock capital for yield farming or liquidity miningExample: Stake 100 ETH → Borrow 70k USDC → Acquire additional ETH or farm stablecoin pools → 1.7x crypto exposure with yield stacking
Strategy: Rotate crypto assets without triggering taxable events by leveraging collateralized stablecoin borrowingHow it works:
  1. Identify overexposure in assets (e.g., 40% ETH in portfolio)
  2. Borrow stablecoins against ETH collateral instead of selling tokens
  3. Use borrowed stablecoins to buy underweight tokenized stocks or build defensive stablecoin positions
  4. Repay loans gradually through staking rewards or new inflows
Benefits: Maintain targeted allocations + defer capital gains taxes + preserve on-chain position continuity
Strategy: Stack multiple yield streams from the same crypto assets for maximized returnsImplementation:
  1. Earn variable borrow interest by supplying tokenized stocks and/or stablecoins to the money market (rates rise with utilization)
  2. Capture staking rewards or liquidity mining incentives (varies by protocol)
  3. Benefit from token price appreciation and protocol governance incentives
  4. Leverage borrowed stablecoins to farm additional yields or participate in liquidity pools
Total Return: Often multiples of traditional HODL returns through composable yield strategies
Strategy: Hedge crypto portfolios during volatile markets using stablecoins, on-chain derivatives, and RWAsTechniques:
  1. Borrow stablecoins against volatile tokens to reduce exposure
  2. Allocate borrowed capital into tokenized stocks with defensive profiles or stablecoin yield vaults
  3. Use decentralized options or futures protocols to hedge downside risk
  4. Dynamically adjust leverage and asset mix based on market signals
Risk Management: Automated liquidation safeguards and diversified collateral reduce downside impact

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Advanced Techniques

Problem: High concentration in single crypto assets (ETH whales, early token allocations)Solution:
  • Borrow stablecoins against large single-asset positions
  • Diversify into DeFi tokens and tokenized equities (stocks) without selling
  • Maintain core exposure while mitigating concentration risk
Example: 1,000 ETH position → Borrow 700k USDC → Acquire diversified DeFi tokens and RWA bonds