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2 clusters · 2 sources · 29 days · First seen · Last updated

Digital asset collateralized lending trends

Overview

The use of digital assets as collateral for loans is evolving through different mechanisms to provide liquidity without requiring investors to sell their holdings. Initially, crypto-backed loans allow holders to access cash using assets like Bitcoin, Ethereum, or Solana. This method enables investors to maintain market exposure and potentially avoid capital gains taxes, though it carries risks such as liquidation during periods of high market volatility.

As the sector develops, Bitcoin holders are increasingly utilizing wrapped tokens to bridge the gap between Bitcoin and decentralized lending applications on other networks, such as Ethereum. This process involves a custodian holding the original Bitcoin and issuing a representative token. Major entities like Circle, Coinbase, and WBTC are competing in this space. While these wrapped tokens function similarly to warehouse receipts, they introduce additional dependencies on the custodian’s security and the reliability of the redemption process.

Entities

Bitcoin · Figure Lending LLC · CoinRabbit · Circle · Coinbase

Timeline

  1. 2 days ago

    [TECHNOLOGY] 2 sources
    Bitcoin wrapped tokens allow borrowing without selling assets

    Bitcoin holders can use wrapped tokens to borrow cash without selling their BTC, but this introduces risks regarding liquidation and reliance on custodians and specific network protocols.

  2. about 1 month ago

    [BUSINESS] 2 sources
    Crypto-backed loans allow cash access without selling digital assets

    Crypto-backed loans enable investors to borrow cash against digital assets like Bitcoin without selling, helping to avoid capital gains taxes while maintaining market exposure.

Sources

crypto-times.jp · cryptoslate.com