Between the end of 2019 and 2020, the amount of BTC as collateral doubled. In a year and a half, the volume of the loan market has grown 1,170%.
Bitcoin as collateral or guarantee for loans on centralized platforms is now an overall operation. Currently, more than 2% of the bitcoins in existence would serve this purpose.
The figure, which represents about 420,000 bitcoins (BTC) or about USD 20,000 million, comes from the report “Banking in Bitcoin: the status of Bitcoin as collateral.” In this study, both organizations studied the leading cryptocurrency uses on the market as collateral to serve various purposes; among them the loans, decentralized finance platforms (DeFi), and derivatives trading.
During the first-mentioned period, the total of bitcoins in this market did not reach USD 2 billion, while by the end of last year, the amount was equivalent to more than USD 24 billion, highlights the report with data from Credmark. This company follows the cryptocurrency lending ecosystem.
These Secured Loans are Also Available to anyone who can Meet the Collateral Requirements
The study notes that “there are several reasons why bitcoin and cryptocurrency loans have grown over the years.” But it particularly highlights the fact that it is a mechanism that grants total access to loans more quickly and easily “than going through a bank and mountains of paperwork.”
These secured loans are also available to anyone. Such loans only need the collateral requirements. There is no need for credits or any other evaluation from the user’s bank, making loans available to more people. These are also available worldwide, and users don’t need a personal relationship with their local bank to receive a loan.
Those users that can access these loans are not necessarily asking for money for daily expenses. Among multiple reasons to use bitcoin as collateral for loans, Arcane Research sees that many users are looking for credit without selling their holdings of bitcoin or other cryptocurrencies.
By receiving a loan in dollars, either fiat or through a stablecoin, the user avoids selling their bitcoins directly. If the price suffers an increase, that user will have managed to increase their BTC position once they pay off the loan.
The BTC secured loan ecosystem is not exclusive to small users. The institutional sphere has also played an important role, as the report points out. This sphere also includes exchanges in the cryptocurrency ecosystem, which use this mechanism to maintain liquidity.
Variety of Lending Platforms with Collateral in Bitcoin
Research from Arcane Research also points that a variety is growing in centralized platforms offering collateralized loan services in bitcoin. Some centralized platforms are more significant than others. Users have plenty of options. Some of these platforms serve as the provider of services at the institutional level, while other companies focus on a particular market; Companies such as BlockFi, Nexo, Celsius, Len, Coinloan, LendingBlock, Unchained Capital, YouHodler, or Genesis, pioneers in this industry’s panorama.
In this scenario, Genesis stands out due to its growth in 2020. According to the report data, this platform had a year-on-year increase of 245% in its loans during the past year.
By: Jenson Nuñez
