Although the original NFT was created in 2014, mainstream awareness of it only came a few years later in 2017, NFT Rising was undoubtedly the year’s most important highlight. It found use in many fields, including art, video games, and real-estate. NFT stands to Non-Fungible Token. This unique digital asset records the ownership of different types of data, such as audio and videos. Protos reports that the NFT hype reached its peak on May 3, when $102M worth assets were sold in a single day. The market plummeted immediately and has continued to drop ever since. These dramatic changes are evident in the Non Fungible chart. In May, sales numbers were more stable than in June. Despite some dips, the NFT industry is expected to continue growing strongly. Recently, Cryptocurrency loan applications that use NFT as collateral have been growing in popularity. NFT can benefit from Cryptocurrency lending in a way that is not possible to imagine. Just like art masterpieces in real life, they can be very valuable assets in Cryptocurrency land. The future of finance and digital art is possible with Cryptocurrency lending. It offers better terms and higher returns. Learn more about Cryptocurrency loans, and how to take advantage of them.
Cryptocurrency Loans vs. Conventional Lending
Although it may seem complicated, it is not difficult to understand. Although Cryptocurrency loans look similar to bank loans (meaning that there are both a borrower as well as a lender), they have certain characteristics.
These are the key differences between traditional and Cryptocurrency loans.
A bank is involved in a standard loan. This means that a bank acts as either the lender or as a mediator between the borrower and lender. Cryptocurrency lending platforms, however, don’t involve banks as the third party.To get a Cryptocurrency loan, you don’t need to have a credit history.
How Cryptocurrency Loans Work
Imagine that you have five bitcoin. You have two choices: sell your assets to make more money, or wait for the BTC price to rise and then sell them. This will allow you to earn more money. Both options have pros and cons. In the first, you might get less money while the asset’s value may never rise. Cryptocurrency loans offer a third option, a Cryptocurrency nft loan. You can use the 5 BTC that you have as collateral. The loan amount will depend on LTV. If your LTV is 50%, for example, you can get 2,5 BTC (50%) equivalent in any currency. Higher LTV loans are more risky. The loan was approved. What’s next? You can use collateral immediately to repay the loan. This is the ideal scenario that every Cryptocurrency borrower hopes for and what drives many people to get Cryptocurrency loans. There is a second option: BTC prices fall, which means that the loan has higher risk. Either everything returns to normal (i.e. BTC price stabilization) or the asset’s value keeps falling. To avoid collateral liquidation (which happens when the market falls), you will need to immediately use collateral to repay the loan. The market volatility is what will make you the most of a Cryptocurrency loan. While Cryptocurrency lending is more risky than traditional bank loans, it can also increase your profits. Cryptocurrency loans have a number of significant advantages over traditional banking. They are more accessible than traditional banking (e.g. for those without financial history, underbanked customers, self-employed workers, and people with no credit history) and can be accessed in a matter of minutes.
Rates of Cryptocurrency Lending vs. Traditional Banking
DeFiRate reports that interest rates for Cryptocurrency lending platforms can vary. Numbers can vary greatly depending on which Cryptocurrency currency is being used. BTC, for example, can have very different rates. The maximum rate is 16.12%, and the lowest one is 0.66%. It all boils down to credit history in traditional banking.
In Summary
We hope you found our article helpful in understanding Cryptocurrency loans and why they could be the next big thing. The Cryptocurrency loan product is still relatively new and has much to learn. We will continue to monitor the development of Cryptocurrency lending and keep you informed. Keep watching!
