Hello everyone ,
Today I am here to share some azaming information with all the readers here.
For those who do not know I must tell that Bitcoin is also used as collateral in the lending markets. And our todays post is just related to that.
So according to a recent report by Arcane Research it was told that the amount of Bitcoin that is being used as collateral in lending markets could possibly reach 1 million in next three years.
In the world of traditional financial ecosystems one of the most common financial tools used are lending and borrowing money. It has been done for years now that large companies as well lends and borrows the money for benefiting one another.
But these lending and borrowing thing has been always done in the native currency of any country. So several blockchain companies like BlockFi , Nexo , Celcius Network and Genesis have started to do the same thing i.e proving services of lending and borrowing.
Obviously as they are all companies that deals and work in crypto currencies their lending and borrowing is also related to crypto currencies and not the native country currency.
There were many firms that saw outstanding growth last year and this growth has attracted investors to lend out their funds to earn big profits in the form of Interest.
I must tell why investors are lending money here in the form of bitcoin or any other crypto currency instead of native country currency.
suppose someone lends 1 bitcoin and the borrower makes a deal on providing 5-6% interest as return. In this case the lender will receive 1 bitcoin + 0.055 bitcoin as interest. Now how is the lender being benefitted , let us try to understand that.
suppose at the time of lending 1 BTC the price of bitcoin was $10000 and when receiving back the lended money with interest the price of 1 BTC wents $20000.
In that case the lender is already being benefitted as the price is now double compared to what the price was at the time of lending the Bitcoin.
I know this is just the one side of the story as the price could went down to say $5000 as well and in that case the lender will be in great loss. So thats why the interest that is being returned is set around 5-6% on any main crypto currency like bitcoin and Eth and the returned interest can also go as high as 12% if it is done in stable coins.
These high rates will fall once the liquidity provided is very large in the volume as that can effect the price in positive manner.
Coming back to our main topic , so the current count of bitcoin used as collateral in lending market is around 420000 BTC. If this trend is continued then according to report the volume could reach 1 Million BTC in next three years.
It is really a good news for people who believe in crypto currencies as this is will increase the demand of bitcoin and not only it will increase the demand but also will have a positive impact on its price.
So thats all for this post , I hope it was a informative post to all the readers reading here. I will be back with another post with more crypto stories soon.
Thank You
Traditional financial transactions will soon become crypto-currencies, it is a variant that can mean the bridge between the old and the new and create a link between those who are not yet accustomed to the fact that in future times there will be no circulating money but only electronic, of course, when the world communication will no longer need the traditional gadgets that still compose it.
It is a good step for many and the risk is shared, as you say, I suppose that little by little conditions will be set so that this can be less risky for both.
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