Only a few years after the creation of the popular cryptocurrency, the first loan for it came up. You can now get a loan for Bitcoin on various centralized and decentralized platforms. But now comes a novelty: a loan secured by Bitcoin.
It presents the bank Goldmann Sachs. What does progress mean for the crypto world? What exactly does this loan look like? And what should you consider when taking out a loan?
The cryptocurrency Bitcoin
Bitcoin, abbreviated BTC, is probably the most well-known cryptocurrency on the market. The virtual currency has been available for purchase since 2013. Cryptocurrencies are traded on a blockchain. This technology is very secure and is therefore used for trading and managing virtual currencies. You can only buy crypto if you have a wallet. To make money with Bitcoin, you have the opportunity to sell the coins again. This is useful if the value is particularly high. However, this varies unpredictably. Recently, the Bitcoin value hit down. Social or economic problems, such as inflation, are often the causes of such a crash.
Goldmann Sachs bitcoin loan
With the Bitcoin-secured loan, the American investment banking and securities trading company Goldmann Sachs brings something to the crypto market that does not yet exist in this form. Bitcoins can be deposited as security for the loan. This means that the loan is backed solely by the cryptocurrency. It is not so long ago that Goldman Sachs had its first exposure to the crypto world. Most recently, they completed the first OTC cryptocurrency transaction in the form of a Bitcoin non-deliverable option.
Following the announcement of the loan, the bank quickly gained its first customer. It was the cryptocurrency exchange Coinbase. The exchange deposited a value of approximately 4,500 bitcoins with the loan. She then received fiat money. How much it was, however, is not known. The collaboration between the traditional bank and the crypto exchange means a step forward for the crypto world. This allows the traditional financial world and the cryptocurrency world to get closer. And the virtual currencies are being recognized and taken seriously as a result. For in recent times, cryptocurrencies were only considered to be virtual currencies. With the new advancement from Goldman Sachs, crypto is finally being recognized as a proper currency.
What financial providers are there?
To make a loan, there are two types of trading platforms where one can do so. On the one hand, these are the key financial service providers. These have a central office, such as a bank, which you can contact if you have any questions. There are contacts on a central platform. Therefore, key financial service providers are also recommended for beginners who want to take their first steps into the crypto world and still need help. In return, it is possible to take out a loan via a decentralized platform. This means that trading takes place on a blockchain. A loan can be taken out on DeFi loan platforms. Smart contracts make it possible to take out a loan there. Due to the complex structure, decentralized platforms should only be chosen by experienced users. Loans on DeFi lending platforms are also disbursed in stack coins and must be exchanged independently. With central providers, you receive the payment directly in euros.
These conditions must be observed
A loan offers many advantages but also some disadvantages. Therefore, before taking out a loan, you should always familiarize yourself with the terms and conditions of the provider. Usually, the minimum term of a loan is three months. As a private person, you usually have fixed interest rates. However, there are also some service providers that offer variable interest rates. For the constant rise and fall of the Bitcoin value, this would be the safest option. Flexible payment rhythms allow borrowers to repay their coins at a later date. This is very useful if Bitcoin should suffer a drastic crash again. No interest is payable until the value is stable again. In contrast, financial service providers can also issue a so-called “margin call” if the BTC value falls. Then the investors have to make an extra payment, otherwise their position can be liquidated.
There are already a few ways to get a crypto loan. Now there is one more. Bitcoin Secured Loan is a big step forward for the cryptocurrency world. The collaboration between Goldmann Sachs and Coinbase deepens the connection between fiat and cryptoeconomics. There are two options when it comes to borrowing. Whether to choose a centralized or decentralized trading platform depends on the user experience. A loan is worth it if you do not want to sell your cryptocurrencies, rely on exchange rates and still want to be liquid. In the future, it can be expected that there will be even more convergence between the two financial worlds and that crypto-technology will continue to evolve.