What is the point of collateralized loans ? - page 3.

Sterbens

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Duelbits.com

Quote from: overttherainbow on January 18, 2021, 08:56:55 AM

This type of loan is only profitable for companies that give you this loan, thats simple

I agree that in essence it is. No company wants to lose out on lending money back without interest and not making a deduction. This becomes an obligation in the economic lending management system.

overttherainbow

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This type of loan is only profitable for companies that give you this loan, thats simple

davis196

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Quote from: Tytanowy Janusz on January 17, 2021, 05:17:31 AM

Earn .... from ... loans ...
Once again
Earn .... from ... borrowing money
You get it? No where in the world you will be able to earn on borrowing money from other person. Its the person you get a loan is earning on you ... No matter what you loan and when and how the value of this asset is changing. You always have to pay what you borrowed + fees. Whats the point of collateralized loans than? Just like in real world. Its all the usages you can have form loan. You need a car? You loan money from bank with your hose as a collateral. You earned on this? No, but you have a car that you can use. You borrowed USDT using ETH as collateral? You have now USDT that you can use to buy other crypto (leverage your portfolio) You borrowed BNB using ETH? You can now use it for lauchpools, lauchpads etc. You want to use product of company that requires you to own a token for premium account but you don't want to be exposed on currency risks? You borrow it for USDC.

OP is asking about the point of putting your crypto as a collateral and getting a crypto loan,not about earning from crypto loans.
It's way easier to just sell your coins,instead of putting them as a collateral and applying for a loan that you will have to repay.
The only point of collateral loans is something I call "financial leverage".You just get loans to buy more crypto and if the crypto prices go up,you get bigger profits.
Financial leverage has little to do with hedging I guess.

amishmanish

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You are right. It makes no sense if you are just trying to make money by using some sort of "loan facility". The collateralized loans are being used quite a lot on major DeFi platforms. The traders who have significant crypto holdings, tend to hold several of these coins. For them a few hundred thousand worth of crypto in a coin which is trading sideways is lost opportunity cost.

So they will take a collateralized loan, borrowing a stablecoin which can then be used for riskier investments and hopefully earn back better returns compared to what they pay as interest. The ETH fee costs that you quote don't remain such a big issue when you are moving around 100K. That is why, I keep repeating that DeFi in its current form is really not for the small guy, no matter what is being said.

There are teams that are working to find a solution to this pretty hard problem. Its an evolving scenario for the time being.

crzy

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Quote from: spy100 on January 17, 2021, 06:27:10 AM

Quote from: jackg on January 16, 2021, 11:44:22 PM

Are you expecting free money?

If the value drops by 1/3 from your crypto to collateral asset, your collateral is sold on a dex afaik too.

So what's the point of collateral loan then ? If i can't use it for hedging ...

That's the cost of borrowing money and there's no way for you to make money through that way so spend the money you'll borrow very well. Collateralized Loans will be use for their protection I guess, look for other great offers I'm sure there's a few where you can save a lot from the fees.

Darker45

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Quote from: spy100 on January 16, 2021, 08:32:41 PM

What's the catch ? I just lost money... How can you make money from taking this type of loan ?

No, there's no money earned. Only money burned.

What is the point in having an amount of stable coin used as collateral for taking a smaller amount of loan instead of just converting it to fiat or whatever token? I don't understand the wisdom behind it, if there's any.

I understand when people would use Bitcoin or certain altcoins as collateral to take loans in fiat. Perhaps they do not want to convert their crypto holdings into fiat and spend it because their cryptos' prices might rise soon. So instead of converting and spending them, they'd rather use it as collateral for a loan. But a stable coin?

spy100

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Quote from: jackg on January 16, 2021, 11:44:22 PM

Are you expecting free money?

If the value drops by 1/3 from your crypto to collateral asset, your collateral is sold on a dex afaik too.

So what's the point of collateral loan then ? If i can't use it for hedging ...

Tytanowy Janusz

legendary

Activity: 2156

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Earn .... from ... loans ...
Once again
Earn .... from ... borrowing money
You get it? No where in the world you will be able to earn on borrowing money from other person. Its the person you get a loan is earning on you ... No matter what you loan and when and how the value of this asset is changing. You always have to pay what you borrowed + fees. Whats the point of collateralized loans than? Just like in real world. Its all the usages you can have form loan. You need a car? You loan money from bank with your hose as a collateral. You earned on this? No, but you have a car that you can use. You borrowed USDT using ETH as collateral? You have now USDT that you can use to buy other crypto (leverage your portfolio) You borrowed BNB using ETH? You can now use it for lauchpools, lauchpads etc. You want to use product of company that requires you to own a token for premium account but you don't want to be exposed on currency risks? You borrow it for USDC.

jackg

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https://bit.ly/387FXHi lightning theory

Are you expecting free money?

If the value drops by 1/3 from your crypto to collateral asset, your collateral is sold on a dex afaik too.

spy100

sr. member

Activity: 658

Merit: 257

Quote from: jackg on January 16, 2021, 08:40:38 PM

Realistically, you can't. It's why the rate for borrowing usd derivatives is so high.

If I use 10eth to take out a loan of $8000 then I can go on to use that eth as I wish or use the money and know that I only need to pay back the $8000+onterest once the eth grows in value. So you might end up with eth at $2400 for example and you'd pay maybe $10000 to get $24000.

That does not make sense ...

Scenario 1
==========
1.10 eth 12288 usd initial (1228 usd )
   ----> If eth grows to 2400 usd ---> my eth is worth 24000 usd +10000 usd as i got to repay loan ( 10000 usd ) = left with 24000 usd - 2000 usd = 22000 -12288 = + 9712 usd
2.set 10 eth as collateral i get 8000 usd at 11.37% APY
   ----> if eth goes down to 500 usd ----> my eth is worth 5000 usd ,no repayment in this case but i lose 4288 do to fact i could have sold it at 12288 usd = left with 8000 usd

Scenario 2
========== ----> if eth grows to 2400 ---> + 11712 usd
I hold it today value 12288 usd

   ----> if eth goes down to 500 ----> - 7288 usd

Ahhh hedging

But if eth goes to 0 so will all tokens ...

jackg

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https://bit.ly/387FXHi lightning theory

Realistically, you can't. It's why the rate for borrowing usd derivatives is so high.

If I use 10eth to take out a loan of $8000 then I can go on to use that eth as I wish or use the money and know that I only need to pay back the $8000+onterest once the eth grows in value. So you might end up with eth at $2400 for example and you'd pay maybe $10000 to get $24000.

spy100

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Activity: 658

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Let's say i have 1000 USDC

Step 1 i deposit it ( gas fee is taken + approve fee i think )
Step 2 i set it as collateral ( gas fee is taken )
Step 3 now i want to borrow 700 DAI ( APY 12.82% ),i click on it
Step 4 approve ( gas fee is taken )
Step 5 Around 650 DAI is sent to my address ... 50 usd lost in fees

What's the catch ? I just lost money... How can you make money from taking this type of loan ?

Topic: What is the point of collateralized loans ? - page 3. (Read 580 times)