Crypto Bloodbath 2021
It all started after Tesla stopped taking Bitcoin for vehicle purchases. The crash began on Wednesday, May 19 and seemingly was a reaction to suggestions that China could ban digital currencies at all after Beijing banned banks and payment firms from providing services related to cryptocurrency transactions.
No matter the reasons, such corrections already have happened previously. For example, during the bullish market in 2017 there were six 30-40% corrections but after every of them Bitcoin price grew on average by 150%. Does history repeat itself this time?
Bill Miller wasn’t fazed by Bitcoin drop this year and said that the volatility is “pretty routine”. “If I liked something at higher prices it is a safe bet I will like it even more at lower prices”, the billionaire said.
Yet the cryptocurrency market is still recovering after the loss of hundreds of billions of dollars this year. As the market reversed and is growing (Bitcoin already had reached $40,000 price by the time of posting this article) we would like to share some thoughts about opportunities it brings: What is crypto lending, how does it work and how you can benefit from it now?
What is Crypto Lending?
This is an opportunity to receive funds by backing them up with your crypto assets. This is an opportunity to save, increase or even change your strategy in the cryptocurrency world.
Crypto believers often “HODL” their currencies and keep them safe in a wallet until its price becomes favourable to sell it. Usually it is a long-term investment. While keeping it is not that easy to just sit and wait for the growth and a common question appears: how can you make it grow faster or how to multiply its growth?
Crypto lending is an answer to these questions. It allows borrowers to unlock a part of their currencies’ value and reinvest more without selling it by using it as a collateral for loans. Still now sure how it works? We got you covered.
Crypto Lending: How Does It Work?
The most common problem long-term players have is a lack of additional funds for investing more or reinvesting. Often it is way too risky to sell your current capital to switch to another currency or to get your current returns since the market might continue to grow up. Also, short-term purchases and liquidity lack of chosen assets might come up. What can you do to avoid it?
Crypto lending gives you an opportunity to use your current holdings as collateral and receive a loan in stablecoins. Usually you have to lock up more value than you receive due to high volatility of cryptocurrencies. Once you repay back the loan and interest your crypto will be fully returned — no matter how the price of it changed during your loan period. This is how you can make an additional handsome profit of your holdings. Your crypto would only be at risk if you failed to keep up with the terms of the loan or if the value of currency used as collateral fell to liquidation price. This is why loans are always overcollateralized. This provides insurance for the lender if the price of crypto dumps hard.
Unlike personal loans or bank lending, collaterals are much more secure for the lender and allows the borrower to take advantage of cheap interest rates. Additionally, you finally are able to make your cryptocurrencies work for you instead of gathering dust in a wallet. No KYC is required. Finally, unlike traditional banking, you don’t need to have any financial history to take a crypto loan.
At CoinRabbit we offer nearly instant crypto backed loans with the lowest ARP on the market. Here are some calculations and examples of how this kind of loans can be used with the services we provide.
Loaning Crypto During Growing Market at CoinRabbit
Let’s talk about opportunities crypto lending brings with the current market conditions:
1. Growing market allows borrowers to earn additional funds while holding
2. The risks are much lower since the market has already dumped
3. You can use different cryptocurrencies as collaterals since most of them correlate with Bitcoin
4. Liquidation prices will be much lower as collaterals became cheaper
Let’s say you are holding 2 BTC which is worth $41.000 now. By using them as collateral at CoinRabbit you unlock $41.000 worth of stablecoins to be used as additional investments, and can buy more altcoins or Bitcoin and continue to hold it. Once the price becomes favourable you should repay the $41.000 loan plus APR and get your 2 BTC back no matter how high the price has changed. Win-win strategy.
Things of your attention and what to keep in mind while taking crypto loans:
1. Liquidation price is something you have to monitor closely. We will send you multiple notifications if your collaterals will be approaching liquidation zones but the best way to avoid it is to simply stay up to date with the current market conditions
2. It is the best time to take a crypto loan when you are confident to receive more funds after the loan period. Your APR should be less.
How crypto lending differs from margin trading:
1. No exchanges needed. You don’t have to pass any registration or KYC
2. Withdrawal of funds is not closed when the market is dumping
3. You are not tied to an exact trading pair and can invest your loan whatever you want. For this case risks are also getting much lower
If you still have some questions you can ask our customer support at our website.
Not financial advice. Do your own research and take everything moderate.
Crypto backed loans have its own risks that should be taken respectively.