With bitcoin hitting unprecedented prices, early investors are becoming more inclined to cash in on their profits, having seen the value of their assets diminish during previous market corrections, according to Rocca. Meanwhile, those who entered the market around 2018 and 2019 seem resolute in their decision to hold onto their investments, opting to borrow against their bitcoin for liquidity needs.
For those choosing to sell, profit-taking doesn’t equate to a complete exit from the bitcoin scene. Many investors redirect their earnings into dollar savings accounts, where they earn interest in $BTC, allowing them to gradually rebuild their cryptocurrency positions while maintaining cash liquidity.
Rocca noted that approximately 45% of Xapo’s users take advantage of this feature.
Currently, Xapo promotes a variable base interest rate of 4.1% on dollar savings, with payments made in bitcoin. Additionally, a limited-time introductory rate of 4.6% is available for new eligible members. They also offer a distinct bitcoin credit fund aiming for annual returns of up to 4% through lending activities, which does entail some credit and counterparty risks for investors.
The underlying goal is to activate existing wealth in a productive manner.
“Yield, accumulation, and income generation are the driving themes of this market cycle,” Rocca commented.
By borrowing, customers can maintain their stake in potential future bitcoin price increases, although this also exposes them to risks associated with price drops while under debt.
Banks Recognize Demand, Yet Proceed with Caution
According to Rocca, traditional banks are increasingly recognizing their clients’ desire for bitcoin exposure. This shift towards interest in custodial and investment offerings marks a significant departure from the skepticism he faced when he first ventured into the crypto space in 2016.