Topic: Is it a good idea to use Bitcoin as collateral for cash loans? (Read 231 times)
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In fact, you can use it as collateral but you have to clear the issue of volatility with the person from whom you are taking a loan. Sometimes the price of Bitcoin can go up or down, which can lead to misunderstanding between the borrower and the lender. So, when using Bitcoin as collateral, the actual amount of Bitcoin should be calculated and the equivalent value of usd should not be calculated.
December 14, 2020, 02:01:46 PM
Fidelity recently announced that it is allowing btc to be used as collateral for its cash loans.
https://www.coindesk.com/fidelity-digital-to-accept-bitcoin-collateral-on-cash-loans-for-institutions
https://www.coindesk.com/fidelity-digital-to-accept-bitcoin-collateral-on-cash-loans-for-institutions
Completely makes sense! Because bitcoin's value is set to increase in long run because it is based on scarcity model. But if you need some urgent cash well within your borrowing limit, then it's an wise thing to do. But ensure that you get back the unit value of bitcoin once the loan is repaid. Big corporates may play a little trick here!
Once you have repaid your loan, ensure you will get back the same units if bitcoin that you had collateralize whike taking the loan and not its dollar equivalent!
December 14, 2020, 01:01:29 PM
This is a welcoming news for us because the more Bitcoin is adopted it will be utilised more in real life as an asset which has limited reach as of now. It's a good ide to use Bitcoin as collateral considering it's history and ability to fighting against the odds and retaining its value. But however the only aspect which would not go well with other financial players when it comes to using bitcoin as collateral would be it's volatility which might give them tough time and eventually giving up ide of accepting Bitcoin as collateral incase if we go through an extended bear market.
December 14, 2020, 12:35:04 PM
I think it is a good idea to leverage your crypto assets if you have a proven working model to increase your wealth. So if you have a working business that generates constant profits and you need money to replenish inventory, purchase machinery, etc. I think it is a smart move to get small loans against BTC.
Keep in mind that you also have to bear the third party risk of default.
Keep in mind that you also have to bear the third party risk of default.
December 14, 2020, 12:10:25 PM
Fidelity recently announced that it is allowing btc to be used as collateral for its cash loans.
https://www.coindesk.com/fidelity-digital-to-accept-bitcoin-collateral-on-cash-loans-for-institutions
https://www.coindesk.com/fidelity-digital-to-accept-bitcoin-collateral-on-cash-loans-for-institutions
The view is very cool and new. When Bitcoin is seen as home, car, real estate, but in my opinion it is probably very unlikely that Bitcoin uses the technology that people know about Bitcoin too little, so it is difficult for people to trust and accept as collateral.
December 14, 2020, 11:52:23 AM
I am sure that the gradual introduction of bitcoin into all spheres of life will lead to such a result that bitcoins will be accepted as collateral. The only disadvantage of such a collateral is the high volatility of bitcoin, otherwise only advantages. But in any case, this should happen, because the volatility will be extremely low with the widespread use of bitcoin, then this minus will be leveled, which again will lead to an even greater increase in the use of bitcoin. Thus, it all looks like a snowball, which only increases in size.
December 12, 2020, 11:30:55 AM
In general, this is a big step in the field of lending, using bitcoin as collateral for a cash loan, but before taking such a loan, you should study all the conditions under which funds are provided and what is the interest rate on the loan and whether it is worth taking it at all
December 10, 2020, 01:37:19 PM
Well, this is indeed a great news to those who don't want to sell their bitcoins for their personal necessity. However, I should also agree with the others that there is risk in making bitcoin as collateral for cash loans due to the price volatility like how would Fidelity respond if the price of bitcoin dumps to its lowest value or if it turns to be the other way that the price increases up to the moon will they just ignore it or will there be any condition for the volatility of bitcoin's price. I would suggest that if someone will do it, -- they better clarify such things first before applying for the loan because at the end of the day we may get into trouble for things that we have not expected to happen just we did something today which we believe is the right thing to do.
December 10, 2020, 12:30:39 PM
Fidelity recently announced that it is allowing btc to be used as collateral for its cash loans.
https://www.coindesk.com/fidelity-digital-to-accept-bitcoin-collateral-on-cash-loans-for-institutions
Would you though consider giving your BTC to them for cash loan knowing that your details and how much in BTC you have will become available? For myself, I think not. It is not wroth giving your BTC as collateral in exchange for an agreed rate as I do not know how that information can be used. At the same time it which option you choose does depend on your idea of data protection. https://www.coindesk.com/fidelity-digital-to-accept-bitcoin-collateral-on-cash-loans-for-institutions
December 10, 2020, 12:25:26 PM
i don't think so.
due to the volatility of bitcoin price neither party in such loans could remain safe. we can see a huge price rise and the company refuses to pay back the bitcoin it took as collateral because the money they loaned is way less than the value of the collateral by then or the opposite if price drops and the user refuses to pay back because they can buy a lot more bitcoin with that money by then.
that's a bad business model with huge risk and i don't think any reputable business would do something like that and you have to ask what is wrong with any that do...
due to the volatility of bitcoin price neither party in such loans could remain safe. we can see a huge price rise and the company refuses to pay back the bitcoin it took as collateral because the money they loaned is way less than the value of the collateral by then or the opposite if price drops and the user refuses to pay back because they can buy a lot more bitcoin with that money by then.
that's a bad business model with huge risk and i don't think any reputable business would do something like that and you have to ask what is wrong with any that do...
December 10, 2020, 12:18:38 PM
like gold, it could be a very good idea! but in this case you need a loan with a sort of fixed limit since price can change dramatically in just one month leading any contract to "explode" with unexpected interest. Probably for emergency/quickly solution could be a good solution, just another financial product.
December 10, 2020, 12:11:52 PM
Fidelity recently announced that it is allowing btc to be used as collateral for its cash loans.
https://www.coindesk.com/fidelity-digital-to-accept-bitcoin-collateral-on-cash-loans-for-institutions
https://www.coindesk.com/fidelity-digital-to-accept-bitcoin-collateral-on-cash-loans-for-institutions
The problem is the price volatility if the lender will accept that risk and willing to take Bitcoin as collateral it's good for for you and the lender . How ever I want to know if you can get the same amount of BTC collateral if ever you paid for it. Most of the people use crypto currency as collateral only for trading pospuses and since you are using cash the use of money lend is different.
Yes, totally possible. Since the price of Bitcoin is increasing in long and mid-term, people may accept Bitcoin was valid collateral for cash and in the case of emergency you can borrow some money and give the bitcoins as collateral. After you paid the loan, they will give back the Bitcoins. In this case you both will get profit, you will get the money you want in the case of emergency also they will keep your bitcoin and if they are wise enough they can get some profit over the bitcoins you gave as collateral.
The problem is Bitcoin price is not always give a good gain for anyone so if ever you use it as collateral just make sure you are aware that it may decrease it's value after you paid for your loan.
December 10, 2020, 11:32:19 AM
Yes, totally possible. Since the price of Bitcoin is increasing in long and mid-term, people may accept Bitcoin was valid collateral for cash and in the case of emergency you can borrow some money and give the bitcoins as collateral. After you paid the loan, they will give back the Bitcoins. In this case you both will get profit, you will get the money you want in the case of emergency also they will keep your bitcoin and if they are wise enough they can get some profit over the bitcoins you gave as collateral.
December 10, 2020, 10:11:13 AM
Fidelity recently announced that it is allowing btc to be used as collateral for its cash loans.
https://www.coindesk.com/fidelity-digital-to-accept-bitcoin-collateral-on-cash-loans-for-institutions
https://www.coindesk.com/fidelity-digital-to-accept-bitcoin-collateral-on-cash-loans-for-institutions
It is not a bad idea though especially if the collateral is higher compare to the loans that they ask for but I don't think the borrowers will easily to borrow if they have btc in their wallet especially if they have an easy ways in cashing it out into their local currency.
I can see only that those who will ask for loans and will provide a bitcoin collateral are those persons who have difficulty in cashing out their bitcoin into their local currency. But this news that fidelity has announce is still in favor to bitcoin lovers as this will surely help the bitcoin to spread further.
December 10, 2020, 09:58:32 AM
I will only use something which has a fixed value for a loan, their is an agency that accepts landed property for loan, not only is this extortion to me it cruel because the value of the land in real time is higher than what is to be loaned, I don't encourage using something with un-fixed value more so something that the value is expected to add/go-up. Those institution knows this.
December 10, 2020, 09:48:00 AM
In a P2P setting, I personally would not recommend this as bitcoin’s volatility may pose a huge risk of loss for both lender and borrower. Due mainly to bitcoin’s susceptibility to massive price spikes and drops, it is an unsafe collateral, not unless if the lender understands the risk and the borrower is willing to put it up as a collateral. This setup is already happening in the DeFi ecosystem, and have been around on P2P loans, but without calculated risks this is just hard to use as a collateral—most especially for the borrower—since the room for price growth or crash is too great.
December 10, 2020, 09:43:00 AM
Fidelity recently announced that it is allowing btc to be used as collateral for its cash loans.
https://www.coindesk.com/fidelity-digital-to-accept-bitcoin-collateral-on-cash-loans-for-institutions
https://www.coindesk.com/fidelity-digital-to-accept-bitcoin-collateral-on-cash-loans-for-institutions
Completely makes sense! Because bitcoin's value is set to increase in long run because it is based on scarcity model. But if you need some urgent cash well within your borrowing limit, then it's an wise thing to do. But ensure that you get back the unit value of bitcoin once the loan is repaid. Big corporates may play a little trick here!
Once you have repaid your loan, ensure you will get back the same units if bitcoin that you had collateralize whike taking the loan and not its dollar equivalent!
To be honest I have been in that kind of situation where I don't want to trade my crypto for cash since I would get some cash in just a couple of days but I don't have other option to sell it.
December 10, 2020, 09:20:09 AM
Fidelity recently announced that it is allowing btc to be used as collateral for its cash loans.
https://www.coindesk.com/fidelity-digital-to-accept-bitcoin-collateral-on-cash-loans-for-institutions
https://www.coindesk.com/fidelity-digital-to-accept-bitcoin-collateral-on-cash-loans-for-institutions
Completely makes sense! Because bitcoin's value is set to increase in long run because it is based on scarcity model. But if you need some urgent cash well within your borrowing limit, then it's an wise thing to do. But ensure that you get back the unit value of bitcoin once the loan is repaid. Big corporates may play a little trick here!
Once you have repaid your loan, ensure you will get back the same units if bitcoin that you had collateralize whike taking the loan and not its dollar equivalent!
December 10, 2020, 07:35:36 AM
Before you borrow any further, it is better to review the borrowing procedure, then calculate the yield at the interest rate charged. because in my opinion, to pass a loan at Fidelity, the stages that must be passed are quite detailed. in order to avoid late payment.
December 10, 2020, 07:21:00 AM
In the DEFI ecosystem, it has long been possible to tokenize your bitcoins and take stablecoins on collateral.
Decentralized Tokenized BTC
https://bitcointalksearch.org/topic/--5288914
Decentralized bitcoin trading
https://bitcointalksearch.org/topic/--5290331
But the most interesting thing should be read in the conditions:
What percentage does the company take for its services and what is the minimum and maximum amount you can get with a pledge of 1 bitcoin.
Decentralized Tokenized BTC
https://bitcointalksearch.org/topic/--5288914
Decentralized bitcoin trading
https://bitcointalksearch.org/topic/--5290331
But the most interesting thing should be read in the conditions:
What percentage does the company take for its services and what is the minimum and maximum amount you can get with a pledge of 1 bitcoin.
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