The Gibraltar based Xapo Bank now offers Bitcoin'backed loans. You don't have to sell your Bitcoin, but instead use it as collateral.
This means that you don’t have to sell your Bitcoin. Instead, you can borrow up to $1 million with your Bitcoin as collateral. So, what’s up with these Bitcoin-backed loans by Xapo Bank?
Xapo Bank offers custodial services for Bitcoin holders. You can now borrow up to $1 million with Bitcoin as collateral. Xapo Bank doesn’t charge any fees. However, interest is around 10%. So, on a $1 million loan, you pay back $1.1 million.
Xapo Bank offers 4 different Bitcoin-backed loan periods. Starting with 30 days, it also offers 90-, 180-, and 365-day options. This is a great option with Xapo Bank. With these loans, you don’t have to sell your Bitcoin. Instead, you can come out on top if Bitcoin appreciates in price. For long-term $BTC holders, this is something to consider.
Source: Xapo Bank
That’s because the Bitcoin price tends to go up in the long-term. On the other hand, the USD price tends to weaken over time. Xapo Bank mentions on their website, that $BTC gained 108% over the last 5 years. During the same time frame, the USD lost 177% of its value due to inflation.
Xapo Bank also plays it safe on its end. Various crypto exchanges also offer $BTC lending. However, that tends to go hand in hand with leverage. Using leverage is a very risky strategy. Even experienced traders can get the short end of the stick with this game. So, if your position gets liquidated, the exchange wins.
Instead, Xapo Bank offers 20% or 40% loan-to-value ratio safeguards. To simplify this, the $BTC price would have to drop to $40,000 before you get liquidated. Although this is not impossible, it’s also very unlikely to happen.
Xapo Bank keeps the Bitcoin you use as collateral in their vaults. Once you repay your loan, you get your Bitcoin back. The bank offers automated repayment options. It also offers a real-time monitoring option with their Loan Health Tracker. On the other hand, the bank doesn’t punish you if you pay your Bitcoin-backed loans back faster than the agreed schedule.
At the moment of publishing this article, the current $BTC price is $88,020 with a $1.74 trillion market cap. Out of the max supply of 21 million $BTC, already 19,842,137 $BTC circulate.
The information discussed by Altcoin Buzz is not financial advice. This is for educational, entertainment and informational purposes only. Any information or strategies are thoughts and opinions relevant to accepted levels of risk tolerance of the writer/reviewers, and their risk tolerance may be different from yours.
We are not responsible for any losses that you may incur as a result of any investments directly or indirectly related to the information provided. Bitcoin and other cryptocurrencies are high-risk investments, so please do your due diligence.
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