Crypto Backed Loans: Who’s Using Them and Why?
Crypto-backed loans have become increasingly popular in recent years as a way to get funds in fiat or crypto without selling your crypto holdings.You are aware of using your crypto to avail a crypto loan and start a credit line but where can you use this fund?
There’s more than one option to utilize your newly availed credit line. And with so many options, it can be tough to decide which one is the best for you. Can you buy a new car or a house, perhaps a vacation? Or maybe to expand your business, kickstart your crypto trading or add new assets in your portfolio? Maybe you simply want to invest better to optimize your taxes? You can utilize your credit line at all the above places and anywhere else where you deem fit. Crypto-backed loans have become increasingly popular in recent years as a way to get cash without selling your crypto holdings. And there are a number of platforms that offer this service. In this article, we dive deeper into the world of crypto-backed loans and explore who is using them and why.
Benefits of crypto loans
There are a number of benefits that come with taking out a crypto loan.
1. Low-interest rates
One of the biggest advantages of a crypto loan is that the interest rates are relatively low. This is because you are putting up your crypto as collateral, which minimizes the risk for the lender. And since the risks are lower, the interest rates are too.ByteX offers you LTV up to 50% and up to 18% APR.
2. Loan is based on the value of the asset
With a crypto loan or a credit line, the loan amount is based on the digital assets that you put up as a collateral. So, when the value of your digital assets increases, so does your loan-to-value(LTV) ratio. And if the value of your digital assets decreases, you can maintain your current credit line by either increasing your collateral or repaying the sum required to balance your LTV. ByteX offers you loans up to 50% LTV, hence you can borrow up to 50% of the value of your collateral.
When taking out a crypto loan, you have the choice of using either your collateral or your currency as security for the loan. With ByteX you can choose to use the top performers including Bitcoin(BTC), Ethereum (ETH), Ripple (XRP),among others as collateral. Or you can use stablecoins as collateral, either way, you are in control of your crypto.
3. Keep your crypto
One of the best things about a crypto loan is that you own your crypto during the entire duration of your crypto loan. You are in control of your crypto and choose to end your loan anytime by paying the utilized credit line of your loan. It lets you still take advantage of any upside potential in the market while using your crypto as collateral for a loan.
4. Quick and easy process
The process of taking out a crypto loan is quick and easy. With ByteX, you can apply for a loan in minutes and receive the funds in your account within 24 hours.
So, who is using crypto-backed loans? And why?
Crypto-backed loans are being used by a wide range of people for a variety of reasons. Here are some of the most common:
1. Hedge fund managers
Hedge fund manager, you can use crypto-backed loans to get exposure to the crypto market without having to sell your holdings. Your new credit line can be used to continue to hold onto your crypto in case the market takes off and while still making a profit. For example, with your $1 million in crypto, you can avail a credit line of up to $500,000. This can be utilized to cover expenses, expand operations and invest in new assets. This way, you continue to have exposure in the market without the need to sell your holdings.
2. Traders
If you are a trader, you can use crypto-backed loans to get exposure to the market without selling your holdings. This allows you to continue to hold onto your crypto in case the market takes off and you can make a profit. By borrowing against crypto, as a trader, you can buy more crypto when the prices are low and then sell it when the prices go up. If you are on a constant lookout for ways to grow your portfolio, a crypto loan can help you do just that.
3. Businesses
If you owns a business, you can use crypto-backed loans to cover expenses or gain new funding without losing on your digital assets. A business that is just starting out may not have the cash flow to cover all of its expenses. In this case, a crypto loan based credit line can be used to cover expenses.
4. Miners
As a miner, you can use crypto-backed loans to cover the costs of mining equipment and electricity as mining is a very expensive endeavor.
5. When making a major investment
If you are looking to make a major investment, such as buying a house or a car, you can use crypto-backed loans to get the funds you need. This way, you can keep your crypto and still make the investment you want.
This works quite differently from traditional finance as there is no requirement for verification. Crypto loans are available to everyone, regardless of their credit score. All you have to do is choose which digital asset/crypto you want to use as a collateral. It is important to remember that all crypto have different LTV values. Now, based on your crypto collateral and pre-decided rates you receive a credit line, which you can use for any purpose. The interest rates on crypto loans are generally lower than traditional loans because digital assets act as collateral. And if the borrower defaults on the loan, the lender can seize the crypto and sell it to repay the loan. This makes crypto loans a much less risky proposition for lenders.
The Bottom Line
Now that you know more about crypto-backed loans, you may be wondering if one is right for you. If you’re looking for a way to get exposure to the crypto market without selling your holdings, then a crypto-backed loan could be a good option. Explore ByteX’s borrowing and lending features to get your crypto backed loan on lowest APRs and a wide range of digital assets.
To learn more, sign up with ByteX today to Trade, Borrow or Earn! We don’t Byte(X).
