What is Crypto Lending?

Introduction to Crypto Lending

Crypto enthusiasts are often encouraged to “HODL” by keeping their assets safe in a wallet until the price of their currency appreciates. Similar to how you would feel uneasy about leaving cash sitting in a bank with low interest rates, some people want to have their digital currency grow. ‍

This is exactly where crypto lending comes into play. Not only can it allow individuals to receive interest on their stash of Bitcoin or other cryptocurrencies, but it allows borrowers the ability to unlock the value of their assets by using it as collateral for a loan.‍

Crypto Lending Explained

One of the biggest challenges with investing can be the cashflow, and there is nothing worse than having to pull from the money or assets you’ve tied up to compensate for that lack of liquidity. ‍

Take an individual who has 4 Bitcoin, but doesn’t want to sell any of it because they predict it will appreciate exponentially. A concern would be that if you do end up offloading the crypto, there will be a risk that you end up with less Bitcoin when you go to buy it back at a later date.

Crypto lending platforms can be a godsend in situations such as this. An individual will be given the opportunity to use (in this case) a digital asset such as Bitcoin as collateral, and receive a loan in other digital assets such as stablecoins. Once the individual has repaid the loan, plus interest, the crypto will be returned in full and will make a great profit if Bitcoin has appreciated. The crypto would only be at risk if the individual failed to keep up with the terms of the loan, or if the value of the Bitcoin held as collateral fell below the value of the loan he received.‍

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