It was recently revealed that Coinbase would soon introduce collateral-based loans taken out against Bitcoin holdings in exchange for instant cash.
The product is a great move by the crypto exchange, allowing it to compete against BlockFi and others in the lending space. But it also may have a side effect that promotes Bitcoin holders to keep on holding for the long term. Here’s why.
Coinbase To Offer Collateral-Based Loans On Crypto
Cryptocurrencies emerged due to Bitcoin’s creation and the rise of alternative forms of digital finance. And what started out as just one cryptocurrency designed to act as the first all-digital form of peer-to-peer cash, was born into an entirely new industry.
Crypto assets now come in all sorts of different types and forms, and which has brought about a new dawn of decentralized finance. DeFi isn’t just a buzz word. Although it is certainly red hot right now, perhaps overly so, but it is a true, sustainable trend building real-world value.
Related Reading | Ethereum Beats Bitcoin, Gold, and Stocks In Stimulus Check Investment
The recent DeFi craze has put the spotlight on crypto-based lending. Assets like Compound allow crypto token holders to lend out their assets for an APY return.
Some companies also allow users to take loans out against their own crypto assets for quick cash.
Popular San Francisco-base Coinbase, will soon be one of those companies, according to a recent announcement. Coinbase revealed they will be offering their customers the ability to borrow as much as 30% of their BTC holdings, up to $20,000 at a rate of 8%.
Holders are only required to make monthly payments on interest, leaving principle up to them to decide when to tackle. After all, it is your own assets you are borrowing against.
This is an enormous benefit for customers, but it also could ultimately be a major boost for Bitcoin.
BTCUSD New Uptrend On the Way? | Source: TradingView