Unpredictable rate hikes in bitcoin and other digital currencies interest many crypto-enthusiasts and investors. Cryptocurrency can be used not only for more efficient payments, but also for making money. If you want to increase your income or want to get stablecoins without having to buy or sell your tokens, a cryptocurrency loan is a great fit.
Crypto lending is similar to regular loans, where you borrow a certain amount from a lender at a certain interest rate. The only difference is that a cryptocurrency loan requires collateral – an asset that guarantees the repayment of the loan. Here are five reasons why using cryptocurrency loans is a great solution for the investors.
Reason 1 — Free liquidity
If you need certain coins or stablecoins right now, but you don’t intend to sell your bitcoins or other cryptocurrency you have, bitcoin loans or other currencies loans are a great option for getting free liquidity against your coins. You’ll leave your tokens as collateral, and you’ll get the currency you need in return.
When you take out a loan from a bank or other financial institution, you pay a certain percentage for it. Crypto loans also involve a fee for using the asset. The interest rate depends on the terms of the loan, the amount of the loaned funds, and the cryptocurrency lending platform.
Using crypto loan platforms like CoinRabbit, you can be assured of free liquidity. You can get your cryptocurrency loan against 140+ coins available on the platform, and your collateral is still yours.
Usually a borrower should deposit more than he wants to borrow against crypto. However, cryptocurrency loans are taken in order to increase certain positions, to cover expenses without touching your current trading positions, or to make new investments, it does not matter.
Reason 2 — Loan is in the stablecoins
Usually you can loan crypto in stablecoins at crypto lending sites. These are cryptocurrencies whose value is tied to a particular fiat currency (i.e., the regular currency — the dollar or euro) or a physical asset (e.g., gold). In theory, a stablecoin can be bought or sold at a fixed price at any time.
Loans are best taken when the pledged coin is rising in value. Of course, this is the ideal situation, which you can’t always catch.
If the collateral currency starts to depreciate, it is the least pleasant situation to avoid the margin call. But you can always add the collateral value and it will save the collateral from the liquidation.
According to the crypto market volatility the loan funds are mostly received in stablecoins which have minimal volatility.
After you take out a loan, you can spend your stablecoins in any way you like, even buy possessions, pay for services or exchange to fiat currencies.
Reason 3 — It’s safe
Cryptocurrency services lend money against a pledge, which is most often a certain amount of top coins: bitcoin, ethereum, litecoin. The client may have a legitimate question: where is the guarantee that I will be able to return the deposit? The main thing is to choose a secure site. That is why it is important to look through ratings of sites on proven resources, read terms and conditions on the site you want to choose for a crypto currency loan site and read reviews of those who have already borrowed coins there.
Also it is important to check the business model of the crypto lending platform. The platform shouldn’t invest the collaterals into third-party projects, but should keep them in the cold wallets.
Reason 4 — It’s fast
In the best crypto lending platforms there is no need to provide personal information, credit or bank history to borrow cryptocurrency (No KYC). All this ensures a high speed of transactions — you’ll get coins almost instantly after applying. Plus, accessing these loans and related financial services is much easier. Moreover, it increases customers’ trust in the sites, because cryptocurrency transactions have always been accompanied by anonymity.
Reason 5 — It’s profitable
Keeping your tokens on lending platforms is a good way to make money. Crypto backed loans can help any trader make a profit. You can borrow the tokens you need and use them to participate in day trading or arbitrage trading, for example.
As long as you keep your cryptocurrency as collateral on the lending platform, while you trade borrowed coins or use stablecoins for purchases, your collateral will be just as volatile as if it were just lying in your wallet. Even in a day, the cryptocurrency can rise in value by tens or hundreds of percent, and the trader can return the collateral, and sell it at maximum profit. So you can actually make money if you keep the coins as collateral, rather than if you just sell it.
Based on the above, we can summarize that anyone can loan cryptocurrency fast and safely to maximize their profits. You can participate in trading and at the same time the deposit on the site will not be frozen, but will change in accordance with the rate. Crypto loans can be used by both beginners and experienced traders — all you need to do is choose a convenient way to implement the coins you borrowed.