Financial Tool: unique
- One of cryptocurrencies unique tools, which I have always admired was collateralized loans. Overcollateralized loans technically, not unlike traditional loans, but they are special and different.
- Collateralized cryptocurrency loans require a deposition an asset and the borrowing of upto roughly 66.66% of it's value, as their is a required 150% ratio of collateral to loan proceeds.
- The collaterailized loan requires no credit check, annual income statements or any other traditional bank assessment of credit worthiness, because they asset is liquid by financial asset standards and is completely in the posseccion of the lender.
- Crypto collateralized lending requires no monthly payment, and if the value of the asset falls due to market forces to the value of the loan, the asset is liquidated or sold immediately to satisfy the debt.
- In this way there is no drawn out process of loan default, asset seizure, asset valuation and asset auction. There is instantaneous selling.
- In some ways cryptocurrency collateralized loans are like delegation on Hive. The asset stays in the possession of the delegator, and can be recalled at anytime.
- This allows you to borrow against an asset and not sell it, while having money to eat and pay your rent. Or if your dealng with disposible income, you can buy more of the asset, deposit within the loan, and then borrow more agaibnst it, buy more and continue this practice indefinitely.
Down the line, you sell a % of your BTC to pay back the loan. The thing is, the BTC tends to appreciate far faster than the debt accumulates. When a bear market turns to a bull market, a quick 2-4x in Bitcoin is possible. v
Last words
- It's a pretty diverse tool. Learn about it. It maybe the only strategy you need to set yourself free.
Suggested Readings
- I suggest you read afew articles on this topic: