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It's unlikely that every single borrower would default just like it's unlikely every stock in an index fund would go to zero. I wouldn't really compare it to op
by thebean11 5y ago
It's unlikely that every single borrower would default just like it's unlikely every stock in an index fund would go to zero. I wouldn't really compare it to options trading, junk bonds are a much better comparison. Lower potential return but also much less likely you would lose money than with options.
Obviously the devil is in the details, it's not clear if/how these loans are secured.
- CPLX 5y agoThere’s no reason at all to think that a complete and total default is unlikely. It’s far from certain but it’s certainly plausible that the value of nearly all cryptocurrency’s will collapse to nothing at all.
- Animats 5y agoThe more likely failure mode is that you've lent to something that's leveraged. That can go to zero on a partial drop of the underlying asset. Which is what happened in 2008.