As a crypto investor, you have undoubtedly come across some Bitcoin lending platform announcements. These platforms come in different sizes and each with different procedures. Bitcoin loans first gained popularity in 2017, as the crypto market skyrocketed to new heights. The crypto-mania hype of the past year has also created a prime environment for Bitcoin lending.
Today, many Bitcoin lending platforms offer all types of funding services, as funding services of all kinds are very popular, and you can even find sites for debt consolidation which are perfect for this. Funding options include getting a loan to buy Bitcoin, using your Bitcoin to secure a fiat loan, and lending your crypto to other people looking for funding. While all of these platforms offer different services, they all have one thing in common – they all bet that the price of crypto will continue to rise.
The main goal of Bitcoin lending platforms is to provide users with more leverage in their trading efforts. Leverage is an investment strategy in which you multiply the efficiency of your transactions through borrowed money. It is a common strategy on the stock market.
In theory, the concept sounds fantastic. You get a loan of $ 10,000, buy Bitcoin, the price goes up, and you laugh all the way to the bank. In reality, the process is much more difficult than that, and in most cases investors are left with huge debts.
Get a loan to buy Bitcoin
Buying Bitcoin can be expensive. Let’s face it, many new investors who would be better off with Bitcoin would invest in cheaper altcoins instead, as they can own full coins at a fraction of the cost. Experienced crypto investors understand that owning a percentage of Bitcoin can be far more valuable than owning a full altcoin.
cash to buy their crypto. Lending companies quickly recognized both the desire of investors to own full coins and the distance from traditional lending platforms in the crypto space. This desire has led to the emergence of a flood of Bitcoin lending platforms over the past year. These platforms offer users more SoFi is one such platform that has gained popularity over the past year. SoFi gives you access to trust funds to buy crypto directly. The platform also offers refinancing of student loans and personal loans.
Get a Bitcoin loan
Another emerging strategy in the Bitcoin lending industry is crypto-direct lending. These platforms completely ignore fiat money. Instead, you receive your credit directly in Bitcoin. There are traditionally two types of Bitcoin direct loans. The first type of loan comes from a loan company. Some new loan companies allow people to take out a car loan in bitcoin, the only caveat is that the car dealership must also accept Bitcoin.
The second type of Bitcoin direct lending strategy involves connecting you with other investors looking to lend their Bitcoin in exchange for some interest on the loan. Platforms such as BTCPOP, Bitbond, and Nebeus specialize in this type of transaction.
Get a Fiat loan using your Bitcoin as collateral
On the other hand, you have around a thousand Bitcoin holders who control the vast majority of existing Bitcoins. Most of these people are long-time Bitcoin HODLers and therefore have no desire to sell their precious coins. Fortunately for these people, they can now get fiat currency loans using their Bitcoin as collateral.
Locking is one of those platforms to offer these services to investors. In a recent interview, Inlock CEO Csaba Csabai explained how the major Bitcoin holders are in a unique position. Csabai explained how his company discovered that 40% of the world’s Bitcoins had not moved from their wallets for over a year. He also touted the tax advantages of this strategy. Crypto transactions are taxable in most countries, but using your Bitcoin as collateral is not.
SALT is another popular Bitcoin collateral lending platform. The company offers same day verification and does not require any credit checks. SALT is considered to be one of the most legitimate Bitcoin lending platforms on the market today. The platform received significant media coverage, including articles in Forbes, Bloomberg, and NASDAQ.
Bitcoin loan scams
Sadly, the Bitcoin lending industry has seen a series of recent scandals that have cost investors billions. One of the most famous scandals is BitConnect. This peer-to-peer lending platform has provided investors with huge sums of money after abruptly shutting down in January of this year.
BitConnect quickly achieved a dominant position in the market after a successful hosted ICO in 2016. The platform is widely touted as a perfect example of why not get involved in Bitcoin lending. BitConnect has made headlines for its Ponzi scheme strategy and premier marketing campaign. Charlie Lee, the founder of Litecoin, expressed his concerns about the platform late last year via a viral Tweeter. Bitconnect ceased operations within a month of the warning.
I’ve been asked what I think of BitConnect. From the surface, it looks like a classic Ponzi scheme. I wouldn’t invest in it and I wouldn’t recommend it to anyone else.
I follow this golden rule:
“If he looks like a walk like a and quacks like a 🦆 then he’s a ponzi.” “😂
– Charlie Lee [LTC⚡] (@SatoshiLite) November 30, 2017
Problems with Bitcoin Loans
January report revealed that up to 18.15% of recently purchased Bitcoins were acquired on credit. These statistics also showed that about 22% of these debts go unpaid. Considering the volatility of the crypto market, this may be in your better interest to save your funds and buy your crypto. For those of you who don’t have the patience or business prowess to convert those loaned funds, Bitcoin lending may be a smart option.
Bitcoin loan: it’s up to you
Deciding if a Bitcoin lending strategy is right for you may require some serious soul-searching. It’s been almost a year since Bitcoin hit its all-time high at just under $ 20,000. For those who have obtained loans at this price, there is no doubt that they regret the decision at this time. Hopefully in the future the crypto market bounces back in these glory days and everyone can pay off their debts. It is much more likely that these debts will go unpaid for years.
Would you like to know more about Bitcoin loans? Discover our comparison of Ethlend vs. SALT.