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To be honest this trend of borrowing against your crypto is specifically something that makes me very suspicious about the current state of the cryptocurrency w
by samvher 5y ago
To be honest this trend of borrowing against your crypto is specifically something that makes me very suspicious about the current state of the cryptocurrency world. If crypto crashes 30-50% again all these loans for which collateral is going to be sold would crash the whole market (or am I missing something?). Also it seems way too popular to borrow against crypto and then use that money to invest in crypto as well, creating significant leverage in the market, worsening the problem I mentioned before and inflating the price of crypto compared to its “true” value.
- rawtxapp 5y agoThese are all over-collaterized, so you're usually borrowing up to 30% of your collaterals value, it's nowhere near the 2-20x leverage that you might get in traditional markets or leverage based exchanges. I think it makes a lot of sense in the current bull market, it probably makes less sense in a bear market unless you're borrowing only up to like 5-10% of your collateral to actually spend on something you need.
- samvher 5y agoThe numbers I’ve seen range more from 40-60% (haven’t gotten involved with this though so not sure how accurate these are). That would cause lots of issues on a 40% pullback.