A loan in bitcoins, in contrast to a loan from a bank, still seems to many to be a real absurdity, because the volatility of the main digital coin is too high. But still, there is a demand for such a service, and it is constantly growing. In early 2018, large financial conglomerates began to prohibit the use of credit cards to buy cryptocurrencies. Payments were rejected at Bank of America and JPMorgan Chase, and then at the Canadian Toronto-Dominion Bank. Customers were warned of a possible drop in the value of most coins, which could lead to serious financial losses.
Despite the market collapse, the digital industry continued to operate services specializing only in the issuance of cryptocurrency loans. The popularity of lending in digital coins grew for several reasons:
Due to the lower interest rates.
An increase in the number of traders and investors who find it convenient to receive funds immediately in cryptocurrency.
A simplified system of requirements for borrowers – those who were not approved for loans from banks could easily receive digital coins.
Another type of lending also became popular. Services issue loans in dollars, euros, or rubles secured by bitcoins. This is especially convenient at times when the market is in a protracted decline, and it is unprofitable to withdraw cryptocurrency purchased earlier at higher prices.
Where to get a loan in cryptocurrency
It is much easier for Americans and Europeans to get a loan in cryptocurrency on specialized international services. Loan applications from Russian citizens are not always approved, and yet there are chances if you try your luck in several organizations.
BTCpop is a P2P lending platform where private investors issue loans (loans) to individuals or legal entities. The platform sets the “rules of the game” for users, conducts verification and helps borrowers find an investor.
Bitbond is a German P2P lending platform. The service appeared in 2013, three years later the company received a license from the German financial regulator (BaFin).
StemFund is a platform that allows investors to lend to individuals and legal entities for up to 1 year. Borrowers are selected in the auction format, where investors offer different lending rates. All transactions are carried out in bitcoins.
Loanbase is a service that imposes rather strict requirements on investors and borrowers: in order to apply for a loan, you will have to provide scans of various documents and fill out a large questionnaire.
The foreign platform Nebeus and the UK, US service Youhodler.com issue loans secured by bitcoins. The CoinLoan service works the same way. The borrower deposits cryptocurrency funds into the account, then creates an application for a loan, the amount must exceed 70% of the current market value of digital coins. After the loan is approved, it withdraws fiat funds, and after the debt is repaid, it withdraws its crypto asset in full.
BlockFi service offers users loans from $ 10,000 secured by an amount in Bitcoin, Ethereum or Litecoin (from 25% to 50% of the loan amount). The more cryptocurrency collateral, the more favorable the conditions for borrowers and the lower the interest rate.
Basically, all services require borrowers to submit the same documents: a passport, proof of income and residence. For example, the Bitbond service requires a scan or photo of an account that the user receives by mail as proof of residence. To get a loan on BTCpop, instead of a passport, a driver’s license is suitable, but an additional photo is required; You can download a video message to increase your chances of getting a loan. Also, services often request links to user accounts on social networks. Each platform has a section that lists a complete list of documents required for loan approval.
Advantages and Disadvantages of Cryptocurrency Lending
The risk is quite high both for borrowers due to the high volatility of digital coins and the lack of regulation in this area, and for investors who may face scammers. On Bitcoin lending platforms, you can go through verification using fake documents; there is information about this on specialized forums.
Many services form the rating of borrowers, but sometimes fraudsters, having paid off several small loans to raise their status in this rating, take out a loan and disappear with the money. The only judicial precedent, when the court ordered the borrower to repay a debt in cryptocurrency, was recorded in America.
The advantages of crypto loans are the following features:
1- Fast processing of a loan on special conditions without contacting official structures
2- Obtaining a loan at a lower interest rate than banks offer
3- The likelihood of an increase in cryptocurrency funds on capital turnover
4- Conducting large international transfers with low commissions.
5- Loans from exchanges and crypto brokers
Many traders make money on digital tokens using margin trading, which allows speculative transactions with cryptocurrencies received on credit secured by a certain amount (margin). A loan from an exchange and a crypto broker is called leverage. With the help of leverage, a trader can make transactions with a value that is several times higher than his own capital in the account.
Leverage is not only a big risk, but also a good opportunity for large earnings, with the correct use of borrowed assets. Today, there are many cryptocurrency platforms that provide margin trading. For example, loans can be taken at Poloniex, Exmo, Bitmex.
A few months ago, the major exchange Binance allowed buying Bitcoin and Ethereum with a credit card through the app. On the main site, users had such an opportunity back in January. To make transactions, traders need to add Visa and Mastercards credit cards to their accounts and remember that there is a commission for each transfer.
Cryptocurrency lending is of interest not only to single players, but to the “whales” of the crypto market – institutional investors. In April of this year, Genesis Global Capital Corporation calculated that since January it has issued loans in cryptocurrency for $ 425 million, and in 2018 this amount was estimated at $ 1.1 billion.
Large loans are constantly taken by exchanges, OTC platforms and private firms. At the same time, the lender himself borrows digital money from large players at 4-5% per annum, and then issues loans at a higher interest rate (6.5-7.5%).
Cryptocurrency loans for experienced players in the digital industry are risky but a real tool to increase capital. The number of those who decide to borrow in digital coins is growing every year. Perhaps in a couple or ten years it will be difficult to surprise someone with a loan in bitcoins, and large banks will offer to issue a loan in cryptocurrency in 15 minutes and in any branch.
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