February 5, 2023

Unique features of cryptocurrency

The cryptocurrency market has shown incredible dynamics in the past few years, standing out for some stability amid instability in the international currency market. The falling value of the national currency forces investors to look for new assets to invest money, which has a positive effect on the reputation of digital money, which is gradually beginning to penetrate the banking sector as well.

A new service in the market is a loan secured by cryptocurrency, which allows you to get real money on simplified terms if you have a virtual wallet with bitcoin coins, ETH, DASH, and others. Not so many financial institutions give such loans yet, and even fewer borrowers are aware of the peculiarities of such lending, which makes it necessary to get acquainted with the service in more detail. A loan with cryptocurrency for collateral is a modern solution.

Why do I need money loans?

Have you ever needed money urgently, such as to repair a car or pay for medical treatment? In the past, you may have had to sell bitcoins to cover such expenses, which entails taxable income or a loss. Now you can do things differently.

  • It is possible to do without selling bitcoins. Selling bitcoins could result in taxable gain or loss 3. Get cash by taking out a loan from Coinbase without having to sell bitcoins.
  • No fees or credit history checks. No fees and no credit history checks, and the annual rate is only 8%.
  • Flexible repayment schedule. Repay the balance of your line of credit on a schedule that suits you. Special terms and conditions apply.
  • Get your money quickly. Funds borrowed can be instantly withdrawn to PayPal or transferred to a bank account through an automated clearing house.

Where to apply for a loan

Getting a loan against the security of cryptocurrency in some countries is not easy, as the country has not yet formed a clear concept and attitude to the new phenomenon. Most users have not heard at all about the fact that there is digital money, the value of which often exceeds the price of real money many times over. Others, those who are familiar with cryptocurrencies, consider them a fraudulent way of getting rich, and only very few understand the value of virtual currencies and tend to use them. The availability of crypto in electronic wallets allows not only to make calculations on Internet but also to get real money, addressing classical institutions.

Investment companies

The essence of the activity of such organizations is an investment, not lending, but if we consider the purchase of cryptocurrency as a kind of contribution with the possibility of receiving dividends in the future, then the comparison is appropriate. For example, some companies have created a program that allows receiving cash loans secured by cryptocurrencies under the following conditions:

  • The amount, term, and size of the loan are determined individually for each client;
  • The average interest rate on loan ranges from 2 to 5% per annum;
  • Pledged cryptocurrency is returned without regard to the difference in exchange rates at the moment of receipt and return.

Some investment companies may not specify some information about the services provided related to cryptocurrencies. Therefore, you need to clarify all the information when you apply and choose a favorable offer.

What cryptocurrencies are accepted

The most popular and coveted cryptocurrency remains bitcoin, worth more than seven thousand dollars per virtual unit. Of course, pledging it to a pawnshop or bank to get a loan does not make sense. Therefore, other, less expensive cryptocurrencies are accepted as collateral, such as:

  • Ethereum;
  • Dash;
  • Bitcoin Cash;
  • Litecoin;
  • Monero;
  • Zcash.

Other digital units can also be accepted as collateral if such a possibility is specified by the lender. If the borrower has cryptocurrency of another name, he can always use specialized exchanges and exchangers, where you can exchange digital money of any company for the necessary and even real monetary units.

Before applying for a loan in exchange for collateral for cryptocurrency, it is worth considering some nuances, among which:

  • The reputation of the company;
  • The terms of the loan;
  • The size of the interest rate and others.

If you need money urgently but there is no possibility to pledge the cryptocurrency or exchange it for the necessary, it will be more profitable to turn to the company CoinLoan. This platform is used by thousands of people from 160 countries around the world.

Decentralized Financing

There is a whole industry in the crypto-industry aimed at finding and providing financing – DeFi. Its usual transactions are based on blockchain, and loans, in most cases, are smart contracts – special computer algorithms that allow to fix and track the ownership of an asset. Once signed by the parties, each contract is stored in a blockchain and is then automatically executed due to the large number of participants in the process, each responsible for a part of the common affair.

For a long time, the ICO (Initial Coin Offering) – the crypto-analog to the IPO, through which companies list their shares on exchanges – remained the main application of smart contracts. The main difference is that the return of investors’ investments, along with returns, is made through the repurchase of tokens by the issuing companies instead of shares. This process replaces the payment of dividends and is financed from the company’s profits. The obligation to repurchase tokens from holders after a certain period is spelled out in the smart contracts concluded with them.

Decentralized financing has given a new impetus to the development of smart contracts. In 2019, it was called “a new dynamic that revitalized the cryptocurrency industry,” and experts were confident that DeFi could soon fully replace traditional banks, using open-source protocols instead of the usual technologies. Most of the existing DeFi applications run on Ethereum blockchain technologies, associated with the cryptocurrency of the same name, which is the second largest cryptocurrency in the world after bitcoin by total capitalization – $257.4 billion.

One of the first and best-known examples of DeFi is the decentralized ethereum lending service MakerDAO, developed by Rune Christensen of Denmark. With its help, any Ethereum owner can pay a certain amount of cryptocurrency, draw up a smart contract and issue their own cryptocurrency-backed DAI Stablecoin, whose exchange rate is pegged to the dollar at a one-to-one ratio. Thus, the site’s clients take credit from it with money issued specifically for them (and, in fact, by themselves).

Risks of Decentralized Financing

The obvious risks associated with DeFi are all the same inherent volatility of all cryptocurrencies without exception. Their rates can change by tens of percentage points in a short period, and Ethereum is no exception. This is fraught with a sharp depreciation of the collateral, due to which it will be partially written off and appropriated by the credit platform. In addition, when Ethereum’s value significantly depreciates, the commission in MakerDAO and other similar services increases. Such a measure is necessary to maintain the token’s peg to the dollar or other classic currencies: the less Ethereum is in circulation, the higher the demand for it, and thus the exchange rate.

Despite its obvious disadvantages, DeFi has enjoyed wide popularity for the past three years. Now for the first time, a traditional investment bank – one of the largest and oldest in the world, founded in 1869 by Goldman Sachs – has decided to join the booming sector. Among Wall Street representatives, it is also known under the nickname The Firm. He chose Coinbase, a cryptocurrency exchange, as his partner. In May 2022, it was the third largest in the world in terms of daily transaction volume ($1.9 billion), just behind the second (FTX exchange with $2.2 billion in transactions per day).

Cryptocurrency loans and pawnshops

Modern pawnshops offer customers service not only in their branches but also on the website, where there is all the necessary information and opportunities for electronic settlement, including cryptocurrencies. The procedure for obtaining a loan secured by virtual money is almost no different from the standard one, except for the transfer of funds to the company’s account. As a rule, the most favorable conditions are:

  • Money is issued in the currency specified by the client;
  • The term of the contract is not more than 64 days;
  • The large maximum amount of credit;
  • Received crypto assets are valued 40-50% less than their real value;
  • After the expiration of the agreement, assets are returned to the client in full.

Similar conditions are typical for all pawnshops, especially all that concern the evaluation of the received collateral, so applying to such service, the client receives standard conditions of service. The loan can be repaid in the following ways:

  • In installments or in full;
  • By card or at a bank branch.

Conclusion

Pay attention to the company CoinLoan. This organization helps you to borrow, exchange and multiply the assets of its clients. The team has been working remotely since day one and is spread across different countries. Users give the company an exceptionally positive assessment of its activities.