Paul Yeung/Bloomberg
The speculative froth that helped to propel Bitcoin past $100,000 for the first time is spilling over into the long-battered crypto lending sector, with decentralized finance applications leading the way this time. Bitcoin’s funding rate the premium paid by traders to open long positions in the perpetual futures market skyrocketed in November, and is up more than 10 times from what it was in early June, indicating a rising thirst for leverage, according to digital-asset data tracker CoinGlass. Bitcoin has more that doubled this year, topping $100,000 on Wednesday….Continue reading…
By Muyao Shen and Olga Kharif
Source: Bloomberg
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The amount of loan you can receive is calculated based on how much collateral you can stake using a loan-to-value (LTV) ratio. For example, if a platform has a 50% LTV, that means you’ll have to stake $10,000 in crypto to get a loan of $5,000. Lenders let you borrow against a predetermined percentage of your portfolio’s crypto holdings.
As your crypto holdings grow, you’ll get access to more margin. Some investors use margin to buy more crypto. Binance leads the pack with its extensive range of cryptocurrencies, advanced trading features, and high liquidity. Coinbase is popular for its user-friendly interface and regulatory compliance. These exchanges are widely trusted and used globally.
To get a cryptocurrency loan, you should sign up with a centralized loan platform like Binance or a DeFi protocol like Aave. You’ll be required to use your existing cryptocurrency holdings as collateral but there’s typically no credit check required! Lenders offer a loan as a percentage of the value of the coins you want to use as security. If you want a crypto-backed loan, you will usually need to own significant mainstream cryptocurrency investments, as minimum loans usually start at around £100,000.
It’s the flip side of lending — the interest users pay for borrowing money is where the yield you can earn for holding crypto via CeFi is generated. Unlike bank loans, CeFi loans typically require little or no paperwork. Via Coinbase, US-based customers in many states can borrow up to $100,000 without a credit check. Cryptocurrency lending pays high interest rates for deposits. Crypto loans offer access to cash or crypto via collateralized loans.
Crypto loans are inherently risky because margin calls may happen if asset prices drop.Some of the most crypto-friendly banks worldwide include Revolut, Wirex, and Goldman Sachs. Many of those institutions even allow trading in trusted exchanges like Coinbase and Kraken. Furthermore, when it comes to crypto-friendly banks in USA, you should check out Quontic Bank, BankProv, or SoFi.
Kraken is one of the oldest and most well-established global crypto exchanges with industry-leading educational resources and security features. Kraken is one of the safest crypto exchanges for investors looking to trade 200+ cryptocurrencies. Regarding cryptocurrencies, though, as they’re not a regulated financial product, it is not covered by FSCS. FSCS are only able to protect financial products and activities that the FCA or Prudential Regulation Authority regulate.
Flash loans are a type of uncollateralized loan in the decentralized finance (DeFi) ecosystem, where assets are borrowed and returned within the same blockchain transaction. They are facilitated by smart contracts and do not require upfront collateral, making them unique in the financial world.The move comes after the Securities and Exchange Commission warned Coinbase that it is at risk of an enforcement action for allegedly offering and selling unregistered securities — a big no-no in the eyes of federal law.
CeFi is an abbreviation for Centralised Finance, which describes those services that overlap the traditional payment system and the decentralised cryptocurrency ecosystem. A cryptocurrency exchange (often abbreviated to CEX) is an example of a CeFi service. Popular exchanges include Coinbase and Kraken.
Interest rates on bitcoin lending platforms can range anywhere between 0.5-8% APY (Annual Percentage Yield), depending on the protocol, loan amount deposited, and term of the loan. These rates are not constant, and are constantly adjusted alongside external market conditions. It could also be a scam if you are told “it’s as good as cash.” Crypto is not protected or regulated like cash or the US dollar.
Crypto is volatile and a substantial risk. Invest only what you can afford to lose. Crypto scammers are experts at getting you to buy their digital assets. Platforms like Binance, KuCoin, OKX, and HTX offer flexible loan terms and reliable services for borrowing against Bitcoin. While it’s tempting to explore borrowing without collateral, like with flash loans, the risks are high, and it may not be suitable for everyone.
However, it’s worth mentioning that while crypto doesn’t directly impact your credit score, that’s also true whether your investments are successful or not. So if you make a lot of money out of your investments it won’t push your credit score up either. Tax-wise, crypto is treated similarly to shares and is taxed in the same way. That means that all cryptocurrency is taxable in the UK. HMRC is clear that crypto may be subject to both Capital Gains Tax and Income Tax depending on the specific transaction.
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