In this brief post, I want to discuss the possibility of accessing liquidity using Bitcoin as collateral, highlighting the advantages, risks, and different available options.
Advantages:
The main advantage lies in the ability to access funds, either in fiat or stablecoin, without incurring capital gains taxes. This allows users to hold onto their Bitcoin assets while obtaining liquidity for additional investments or everyday expenses, without needing to sell their precious SATs.
Risks:
It is crucial to consider the risks associated with this type of operation. For instance, there is the risk that the platform where the loan is requested may disappear, raising the question of how the Bitcoin used as collateral would be recovered. Another significant risk is that of liquidation, which occurs when the value of Bitcoin decreases and there are no longer enough SATs to support the debt, leading the platform to liquidate the collateral to repay the loan. To mitigate this risk, it is essential to understand and control the Loan-to-Value (LTV) and be aware of liquidation levels.
Options:
There are several companies in the market offering this type of financial operation, each with its own distinctive features.
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LEND By Hodl Hodl: This platform allows borrowers to borrow stablecoins from other users, with competitive interest rates and a custody system that requires approval from multiple parties to move the secured funds.
- Fees and Limits: 1.5% commission of the loan value in Bitcoin. Maximum loan duration: 12 months. Maximum amount: $25,000. Maximum number of simultaneous loans per user: 20. LTV to open a loan: between 30% and 70%. https://lend.hodlhodl.com/
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LEDN: Offers loans in stablecoin or fiat with Bitcoin or Ethereum as collateral, with the option of "auto top-up" to maintain an adequate level of collateral.
- Fees and Limits: 2% opening commission. Maximum loan duration: 12 months. Minimum amount: $1,000. LTV to open a loan: 50%. https://ledn.io/
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FIRE FISH: This Swiss platform offers loans in EUR or CZK, with an opening commission and a custody system following a 3/3 model.
- Fees and Limits: 1.5% opening commission of the loan value. Maximum loan duration: 18 months. Maximum amount: 15,000 EUR. LTV to open a loan: 50%. https://app.firefish.io/
It is important to carefully review the policies and procedures of each platform before committing Bitcoin as collateral, to ensure a full understanding of the risks and benefits involved.
Conclusion:
Accessing liquidity using Bitcoin as collateral can be an effective strategy to maintain market exposure while obtaining funds for other investments or expenses. However, it is crucial to understand and mitigate the risks associated with this type of operation and carefully choose the platform that best suits the needs and risk tolerance of each user.
I encourage you to share any additional information or experiences you have with companies offering similar services. Your insights can greatly benefit the community by providing a broader understanding of available options and potential pitfalls.
PLEASE DYOR