Several enterprises have developed services that let individuals and businesses use cryptocurrencies as loan collateral.
Currently, the value of all the bitcoin in the world is $154 billion. And, Bitcoin is only the most well-known cryptocurrency in the global economy. If we combine the value of bitcoin with other cryptocurrencies with a market cap of at least $1 billion, such as ethereum, Litecoin, and Ripple, the total value comes to approximately $210 billion.
Financially speaking, this value is under-leveraged. Unlike conventional assets, cryptocurrencies are not integrated into the mainstream financial system and can’t be used as collateral for loans and other financial instruments. The value of cryptocurrencies remains mostly untapped.
Several enterprises have identified this untapped potential and have developed services that let individuals and businesses use cryptocurrencies as collateral for loans. This article focuses on one of the newest entrants to the crypto-backed loans section: Bankera Loans. But, regardless of which crypto-lending platform you choose, there are a few key elements to consider in looking at crypto-backed loans.
To receive funds through a traditional loan, borrower has to provide an asset of value to back it up. This is known as collateral. Borrowers risk losing their collateral if they default on loan payments. A crypto-backed loan is the same, except it lets borrowers use cryptocurrency holdings as collateral, rather than a home or business.
Crypto-backed loans are an option for people who want to use the value of their cryptocurrency holdings without selling any. This could be because they think cryptocurrencies will increase in value in the future. With a loan collaterized with cryptocurrency, it is possible to access the value of one’s holdings without liquidating them.
Crypto loans are also very flexible. There are options for individuals looking for microloans, as well as companies looking for significant financing. While…