The use of bitcoin as collateral or guarantee for loans on centralized platforms is becoming increasingly popular. Currently, more than 2% of the bitcoins in existence would be destined for this purpose, according to calculations by the analysis firm Arcane Research and the exchange of cryptocurrencies Bitstamp.
The figure, which corresponds to about 420,000 bitcoins (BTC) or about USD 20,000 million, is derived from the report « Bitcoin banking: the status of Bitcoin as collateral «. In this study, both organizations evaluated the use of the main cryptocurrency on the market as collateral for various services. Among them, the aforementioned loans, decentralized finance platforms (DeFi) and derivatives trading .
The researchers point out that “growth in the cryptocurrency loan market has been extraordinary over the last year ”, with billions of dollars invested by institutions in this market.
With about 4 or 5 years of existence, the The market for loans with bitcoin as collateral is relatively young, even for an already new world, such as that of cryptocurrency. However, it remains a «rapid growth», according to analysts.
Between the third quarter of 2019 and the last of 2020, the increase is clear. Between both periods, the amount of money in loan platforms rose 1,170%, shows a graph of the report. And between the last quarter of 2019 and the last of 2020, the amount of bitcoins placed as collateral went from 213,000 to 420,000 BTC.
During the first mentioned period, the total of bitcoins in this market did not reach USD 2,000 million, while at the end of last year the amount was equivalent to more than USD 24,000 million, highlights the report with data from Credmark, a company that follows the cryptocurrency loan ecosystem.
For what to ask for loans with collateral in bitcoin?
The The study notes that “there are several reasons why bitcoin and cryptocurrency loans have grown over the years.” But it particularly stands out the fact that it is a mechanism that allows access to loans in a faster and easier way “than going through a bank and mountains of paperwork.”
These secured loans also they are available to anyone who can meet the warranty requirements. No credit checks or evaluations from your bank, making loans available to a wide range of people. These are also available worldwide, and you don’t need a personal relationship with your local bank to get a loan.
Despite what one might think, those who access these loans They are not necessarily asking for money for living expenses, the researchers note. Among multiple reasons to use bitcoin as collateral for loans, Arcane Research notes that many users seek credit without selling their holdings of bitcoin or other cryptocurrencies, to increase their exposure to the asset in anticipation of a price increase.
When receiving a loan in dollars, either fiat or through a stablecoin , the user avoids selling their bitcoins directly. If the price goes up, that person will have managed to increase the value of their position in BTC once they pay off the loan.
The ecosystem of loans with guarantees in BTC is not exclusive to small users. The institutional sphere has also been widely involved, as the report points out. This also includes exchanges of the cryptocurrency ecosystem, which use this mechanism to maintain liquidity.
Variety of loan platforms with collateral in bitcoin
Arcane Research also points to a growing variety of centralized platforms that offer collateralized loan services in bitcoin. With some larger than others, there are platforms for all tastes. Some focus more on providing their services at the institutional level, while other companies are aimed at serving the particular market.
In this panorama we find companies such as BlockFi, Nexo, Celsius, Ledn, Coinloan , LendingBlock, Unchained Capital, YouHodler or Genesis, pioneer in the industry.
Genesis stands out in this scenario, due to its growth in 2020. During the past year, this platform had growth 245% year-on-year on its loans , according to the report’s data.
For its part, Celsius has processed more of USD 8,000 million in loans since its inception, in addition to having launched its own token (CEL), which is currently priced at about USD 5 per unit and is ranked 56 in the market according to its capitalization total, according to CoinMarketCap.
Examples like this show the growth of this ecosystem to which the study refers and that we have already reviewed in CriptoNoticias. Meanwhile, Arcane Research sees the rise of bitcoin in recent months as a turning point for the further surge of loans secured in BTC.