Michael Anderson used to mine bitcoin whenever he was inside his dorm. He left his corporate job in order to invest in crypto-related projects. Once Michael purchased his first-ever house in San Francisco, he surprisingly did not go to a bank for credit or loan. Instead, he did something that very few people might have thought of before, and that is, borrowing against the crypto he owned. Similar to Anderson, an increasing amount of crypto aficionados have been utilizing their crypto holdings.
They are using these holdings in order to buy more crypto, cars, homes, and a lot of other stuff. More often than not, these individuals are acquiring loans from a variety of non-bank-related lenders. Some blockchain platforms also happen to be providing these loans. Similar to a large number of banks, the lenders being talked about generally tend to take deposits. However, they are also different from banks in the sense that the deposits they tend to take are in crypto form.
As most of you might be aware, crypto deposits tend to earn interest rates that are more than your average interest rate. However, these loans are available in different types of forms. People who borrow these loans can acquire them in the form of Dollars and a variety of other currencies, as long as they are traditional. Some people even prefer taking stablecoins, depending on the type of lender or provider they go to. Needless to say, businesses like these are growing at an incredibly fast rate.
You would be surprised to learn that there is a group of lenders that has provided loans as high as $25 billion. These loans are outstanding to a variety of institutional as well as individual clients. Loans backed by crypto have significantly increased recently and there is a good chance that they will increase even more as time passes by. More often than not, people tend to use loans backed by crypto for the same reason someone takes a loan against a stock portfolio.
At the end of the day, the goal of every individual is to take advantage of increasing prices while making sure that they do not diminish betting sizes. For instance, Ether has significantly risen over the years, especially the last one. This essentially eclipsed interests concerning the loans backed by ether. Experts suggest that borrowers can take advantage of strategies like this in order to steer clear from capital gains taxes.
With crypto backed loans becoming more popular than ever, it would be fair to say that crypto investments will increase down the line. Some people even believe that these loans will leave behind regular loans by a country mile.