In addition to working hard to be a good “farmer” and “farming in the ground” more efficiently, the crops we have harvested must also be managed well.
Author: Lou Yue
Finance has always been a high-standard industry with barriers to entry. As an emerging field, the crypto market has ushered in a wave of small industry climaxes under the influence of decentralized finance for wealth creation. In addition to working hard to be a “farmer” In addition to more efficient “farming on the ground,” the harvest of crops in hand should also be managed well.
Prior to this, we sorted out the entry-level financial management strategy in the CeFi field, ” CeFi enterprises grab a single currency financial management, a multi-perspective interpretation of the three camp financial products ” and the advanced strategy ” Comprehensive analysis of CeFi dual currency financial management: risk hedging combined with financial management and options Method “, today let us learn some advanced version 2.0 of financial management-cryptocurrency lending .
Borrowing was born in a bull market and arose in a bear market
Pledged lending related services in the encryption field have become one of the main infrastructures in the gradual maturity and development. Except for the recent hot DeFi lending market, most CeFi (Centralized Finance) institutions similar to traditional banks It has also entered the market early for layout, and its application scenarios have evolved from early capital turnover to multiple different application scenarios such as risk hedging , investment , and derivative arbitrage .
Most of the CeFi institutions engaged in the digital currency lending business entered the market during the bull market at the end of 2017 and the beginning of 2018 for early deployment. However, it was basically in its infancy at that time, and the market was not very hot and concerned.
In the bull market at the end of 2017, the market was shrouded in optimism about rising market conditions. Some investors lacked their own funds, but did not want to miss the rising market, and there would be a demand for ” borrowing money to speculate “. Some investors will use their cryptocurrency as collateral to obtain cash loans for daily expenses. On the whole, the development of the industry, which was dominated by the needs of individual investors, was still in an upward period.
As the market gradually turns bearish, the market trend is unstable and the transaction volume continues to be sluggish, some blockchain companies are also facing the problem of wages, mining machine manufacturers are facing difficulties in capital turnover, and difficulty in maintaining operations. Most mines are long-term bullish groups who are reluctant to sell coins to maintain operations, and believe that when the market picks up in the later period, the profit from the rise in the currency price can cover the interest generated by the pledge loan, and they will choose to pledge the coins in their hands to borrow money.
In this context, the intervention of large investors has resulted in an explosive development of crypto lending and wealth management as a rigid demand .
According to a Bloomberg report in January 2019, in the case of a bear market, some blockchain companies have chosen to lay off or close down, but many lending companies such as BlockFi and Salt Lending have achieved substantial increases in revenue. Among them, BlockFi Since June 2018, revenue has increased 10 times .
According to a report by the blockchain company Graychain Ltd. at the end of 2019, the scale of the entire crypto lending industry at that time had reached 4.7 billion U.S. dollars, and the number of crypto lending platforms was growing rapidly. Since 2018, the lender has earned a total of US$86 million in interest. By the first quarter of 2019, there were more than 5,400 new loans and at least 18,500 new loans in the second quarter. The amount of loans also increased, with US$64.8 million in loans in the first quarter and US$159.3 million in loans in the second quarter.
The lending market depends on huge imagination
The mortgage loan market in the traditional financial sector includes various forms such as real estate mortgage , securities mortgage and inventory mortgage . At present, supporting laws, regulations and rules have been established and perfected. Mortgage loans have also achieved outstanding results in terms of security and profitability. They not only played a huge role in accelerating the turnover of currency funds , but also stimulated the expansion of production and circulation of enterprises, so they also played an important role in the financial market. Roles.
Taking car loans and housing loans as examples, after the borrowing behavior occurs, the borrower still has the right to use and reside in the mortgage. Generally speaking, if the encrypted assets are pledged, the borrower will transfer it to the platform or lender through an on-chain contract, so it is more like an A-share listed company’s equity pledge behavior.
Then taking A-share market data as a comparative reference, most companies will choose to pledge their stocks at a pledge ratio of 10% . According to CoinMarketCap data, as of now, the market value of Bitcoin is about 212.4 billion U.S. dollars, just one Bitcoin. From this point of view, there will be a potential market demand of approximately US$21.24 billion. Looking at the entire cryptocurrency market value, the current market value is about 362.7 billion U.S. dollars, and the potential market size of the lending market may reach 36 billion U.S. dollars .
Source: Databank
Genesis Capital , a cryptocurrency lending service provider, pointed out in the second quarter 2020 operation report that an important theme in the second quarter of the market is the demand for the yield of crypto assets. The rate of return drives the development of the market for cryptocurrencies and other asset classes. Perhaps due to reduced volatility, perhaps due to the exponential growth of infrastructure and product creativity, investor interest rose sharply in many forms in the second quarter.
The three most common ways for investors to generate income are spot loans , call options, and liquid mining . In order to further participate in the liquidity mining boom, hedge funds and other institutions will borrow additional tokens and deposit them Platforms such as Compound to earn revenue have greatly enhanced the liquidity between various tokens.
In terms of loan business, Genesis Capital’s outstanding cryptocurrency loans totaled US$1.4 billion in the second quarter, an increase of 118% from the previous quarter, and new loans of more than US$2.2 billion were added, an increase of 324% year-on-year, a new quarterly high. Unpaid active loans increased by 118% from the first quarter, and cumulative loans granted increased for the ninth consecutive quarter. Since its establishment in March 2018, the total amount of loans granted has reached 8.4 billion U.S. dollars .
Unique advantages of crypto assets
As an indispensable part of the operation level of the encryption field, pledge lending has various unique advantages over traditional finance in terms of the basic attributes, liquidity, default cost, and security of the pledge.
Real assets cannot be faked
First of all, from the perspective of the basic properties of assets, the first and most important thing facing the middle matching platform in traditional forms of lending, mainly car loans and housing loans, is how to verify the authenticity of assets . This process is often Requires complicated processes and procedures.
In contrast, encrypted assets can be implemented openly and transparently through the underlying blockchain technology . The relevant data of the entire process can be tracked and verified on the chain. The platform can create a smart contract based on a smart contract that does not require banks, etc. The system of trusted institutions is almost hard to fake.
High liquidity and low cost
In the traditional financial lending market, real-time transactions and purchases of collateral such as cars and houses are often not possible . As an asset class that operates 24 hours a day, 7 days a week, cryptocurrency brings more liquidity and operating space.
On the other hand, for borrowers, because cars and houses often cannot be ” divided “, the operation method and space are relatively fixed, but cryptocurrencies can choose the appropriate pledge ratio to borrow according to their needs, such as Bitcoin Coins can be traded in units of “satoshi”.
From lenders to borrowers, traditional mortgage loans often involve multiple intermediaries, but there are usually no more than one or two intermediate participants in the cryptocurrency mortgage process. The traditional lending market is a top-down operation driven by banks. Structure, the encryption market is a bottom-up operating system driven by users.
The high liquidity, simplified transaction process and convenience of encrypted assets enable borrowers to greatly reduce economic and time costs, and the entire borrowing process can even be shortened to a few minutes .
Low cost of default enforcement
Under normal circumstances, if traditional borrowing encounters default-related problems, it may be accompanied by high execution costs . If it is a mortgage loan using real estate such as houses, it often requires complicated and time-consuming legal enforcement procedures, and There are many uncontrollable factors.
For example, the borrower’s real estate may not be enforceable when there are some legal issues such as ownership, and there may also be disputes such as unpaid bank loans or insolvency of the real estate or car itself. Even if there is no legal dispute, the disposal and auction of assets requires a long-term process and their original prices may fluctuate with market conditions and the relationship between supply and demand.
If the pledge is cryptocurrency, for the platform party, if the lender defaults, such as the currency price falls below the liquidation line , the platform can directly sell the cryptocurrency to the borrower to avoid risks and obtain protection. And can conduct real-time transactions 24 hours a day without interruption.
Lending market operation model
The encryption lending business mainly connects borrowers and lenders through the platform, and provides encrypted financial capital solutions. The lending platform plays the role of an intermediary service provider and provides matching services for investors with different needs, so that all parties can access similar traditions. Financial banking services .
Pledge
The pledged loan in the traditional financial sector refers to a loan issued by a lender using the movable property or rights of the borrower or a third party as a pledge according to the pledge method stipulated in the ” Guarantee Law “.
Among them, bank drafts, bank acceptance drafts, checks, promissory notes, deposit notes, treasury bills and other securities pledged, the pledge rate shall not exceed 90% ; movable property, legally transferable shares (stocks), commercial acceptance drafts, warehouses For bills, bills of lading, etc., the pledge rate shall not exceed 70% at the maximum; for other movable property or rights, the pledge rate shall not exceed 50%.
The pledged lending in the encryption field is basically consistent with traditional finance. The current encryption market is basically divided into three categories: legal currency , encrypted assets , and mining machines . Users can choose to pledge any of these assets in exchange for another asset category, and different pledges are also Corresponding to different market needs. It is more common to borrow cryptocurrency with fiat currency pledge and borrow fiat or cryptocurrency with cryptocurrency or mining machine pledge.
Cryptocurrency pledged assets are generally based on mainstream currencies with good market value and transaction depth , such as BTC, ETH, mainstream platform currencies and stable currencies.
Pledge rate LTV
Generally speaking, the platform will calculate different pledge ratios (LTV, Loan-to-Value) based on different pledged assets, risk control, capital amount, etc. The calculation method of the loan value ratio is the loan amount divided by the pledge value. Expressed as a percentage. The lower the loan-to-value ratio, the lower the risk.
At the same time, due to the risk of volatility in the cryptocurrency market, platforms generally do not release loans at a 100% ratio. The pledge rate of most platforms is usually between 50-70% , which means that users pledge Bitcoin worth 100,000 yuan To the platform, only RMB 50,000 to RMB 70,000 loans can be obtained.
In addition, the pledge rate is usually linked to the platform’s liquidation mechanism . When the user performs the initial mortgage, the loan will be completed according to the set pledge rate. However, when the market fluctuates sharply, the pledge rate will increase accordingly. When the pledge rate reaches the warning line set by the platform, the platform usually reminds the user to make additional collateral to cover the warehouse or repay the loan in advance.
When LTV rises, the value of the underlying asset will fall. As far as encrypted asset loans are concerned, the value of Bitcoin and Ethereum is declining. If the price of encrypted assets drops too low, LTV will continue to rise. When it is close to 100%, the mortgaged assets will be sold to repay the loan. This is the liquidation threshold , which is the liquidation price. This threshold may vary depending on the platform’s business and loans.
Assuming that the liquidation threshold is set to 90% LTV, when the LTV ratio reaches 90%, encrypted assets will be sold to reduce LTV.
If the user does not cover the position in time, the pledge rate reaches the threshold set by the platform, or the pledge is insufficient to pledge the loan, the platform system will often initiate automatic liquidation to ensure the safety of funds.
cost
When a lender starts a transaction, it needs to pay a certain handling fee based on the platform’s interest rate. The platform will incur different fees according to different borrowing currencies and pledges, and the handling fees between various platforms are often inconsistent.
The use of legal currency as collateral is relatively low risk and is a high-quality asset, and often has low handling fees. It is mainly for institutional or individual investors who are willing to trade digital assets for arbitrage.
The loan of legal currency with encrypted assets or mining machines as pledges mainly exists between institutions and mining companies, but due to relatively large asset fluctuations, the handling fees are usually relatively high.
In addition to handling fees, interest will also be generated during the lending process. Borrowers need to pay interest to the platform in the form of legal currency or encrypted currency, usually in the same token of the loaned currency for repayment. Part of the mortgage loan interest is calculated by the hour or by the number of days. Correspondingly, the lender can earn interest on this.
Lending market demand
The primary reason for some large institutions and mining companies to borrow is to obtain cash flow . For example, institutions will use loans for wages and miners’ loans to supplement current assets to further expand reproduction input or for capital turnover.
Individual investors will use it to pay bills or make daily expenses, and some investors will use it for arbitrage trading and “borrowing money to speculate”.
Funding sources mainly come from blockchain companies, miners, project parties, hedge funds, high-net-worth users, etc. As mentioned at the beginning of this article, most of the demand for borrowing is cryptocurrency investors, miners, institutions, companies, etc.
Potential risks in the lending market
With the continuous inflow of funds in the cryptocurrency market and the increasing demand for borrowing by more and more individuals and institutions, the lending market has shown a prosperous development trend, but under the background of rapid expansion, some potential risks are hidden. . Especially in this year’s 312 market, we have seen a stampede caused by deleveraging. Not only the CeFi lending market, but some problems in the DeFi lending market are also fully exposed in this high volatility and liquidity risk.
Liquidation risk
Initially, when users sign a loan agreement with the platform, they will agree on a liquidation pledge rate, although some platforms will remind users to add collateral and cover positions when the pledge rate reaches the warning line.
But when an extreme market such as 312 appears in the market , the pledge rate will quickly rise from the warning line to the strong flat line , and users may be liquidated before they have time to cover their positions. Even the encrypted assets that some users have replenished their positions could not be received in time due to network congestion, and the received assets may still be insufficient to repay the loan due to violent market fluctuations, and the liquidated assets cannot be recovered, resulting in further losses in the user’s assets.
This year’s 312 slump not only impacted the CeFi lending industry, but under the slump of Ethereum, many exchange platforms and DeFi platforms based on collateralized Ethereum were liquidated in large numbers, causing serious network congestion, among which decentralization A large number of loans on the MakerDAO platform, a financial lending platform, fell below the mortgage threshold, triggering a concentrated liquidation .
MakerDAO then decided to conduct the liquidation activities in the form of collateral auctions. Users can bid for DAI to obtain ETH collateral. At that time, the purpose of the auction was to exchange 50,000 incremental DAI for debt repayment. However, due to the complete lack of competition, some liquidators gave 0 DAI The bid won the auction.
It can be seen that some lending platforms still have problems in the settlement mechanism and mortgage rate setting. Such problems may cause many lenders and borrowers to suffer huge losses.
Trust risk
CeFi-based lending business requires users to place their coins in the hands of a trusted third-party platform. The custody of funds is based on trust in the third party , which will undoubtedly lead to trust issues such as platform failure or runaway. Since the operation logic of some platforms is similar to that of P2P lending, there is a potential risk of thunder.
In the field of encrypted asset lending, there is still no comprehensive rules and regulations to regulate transactions between pledgers and platforms. If there is no third-party custody, the user will directly transfer the encrypted assets to the platform account during the pledge transaction, then this means that the platform controls the right to use the cryptocurrency, and there may be payment slips, Misappropriating tokens for other transactions may even cause token custody problems or risk of being stolen.
In the case of a downturn in the market, interest and handling fees may not allow the platform to maintain a continuous source of income. Some platforms will passively use mortgage assets for arbitrage, quantification, hedging and investment transactions, although some platforms do also have investments such as financial management The business is not necessarily the user’s mortgage assets, but the development of transparency in the CeFi field still needs to be improved.
Price and liquidity risk
Whether for borrowers, lenders, or platforms, the tokens pledged in the lending business will definitely be affected by price fluctuations in the secondary market. In addition to stablecoins, crypto assets such as Bitcoin are highly volatile. The greater the volatility, the higher the risk.
Crypto financial service provider PayPal Finance founder Yang Zhou and co-founder Wang Li pointed out when reviewing the 312 extreme market that from March 12 to 13, the USDT/CNY OTC premium was exaggerated to 10% about. The first possible reason is that from March 7th to 13th, the price of Bitcoin dropped from more than $9,000, and there were a large number of sell orders in the market. Because the Bitcoin market is the most liquid market, and other markets have liquidity problems, everyone will sell the best-selling assets first to make up for it.
The second reason is that some people need to make up their bitcoin positions, sell assets in the real world or other worlds, or exchange them for legal currency, and then make up for the bitcoin market. However, the OTC channel is actually like a canal. The width is limited. If a very large flow suddenly flows in, it can’t handle it, and the premium is very high.
At that time, all prices in the entire market had expired , and liquidity was lacking in a short period of time, which has caused the subject of the transaction to not be well priced.
Leverage risk
In the 312 market review, Yang Zhou, the founder of the crypto financial service provider PayPal Finance, further stated that before the market crash, the market was madly increasing leverage from indicators such as the rise in inter-agency lending rates and the increase in basis spreads. The direct cause of the slump in the market is actually caused by the drop in the spot market, which then drives the futures market under high leverage, triggering a series of leveraged liquidation .
Due to the generally high risk appetite of participants in the cryptocurrency market, the use of high leverage has also greatly aggravated the market decline, spreading risks to the entire market, and the emergence of the domino effect has led to a downward spiral in the market.
Compliance risk
Although encrypted lending platforms mainly provide intermediate services, related businesses involving encrypted assets have not been clearly recognized by the law. From the overall cautious attitude of the regulatory authorities, it can be seen that encrypted lending-related businesses actually have policy regulatory risks .
The handling fees and interest in the lending process involve the payment of encrypted assets. If there is a payment problem, there will be uncertainties that are not recognized by the law.
Encrypted lending services are similar to the P2P online lending model. In addition, the platform itself has trust issues and cannot operate in full compliance. Therefore, there is also a risk of ” storms “.
Current status of the domestic lending market
From the perspective of platform entities, the domestic lending market follows the continuous development of user groups and market needs, and has expanded from financial service institutions that provided services in the early days to wallets , custodian service providers , exchanges and other fields.
Financial Services Agency
Paypal Finance
PayPal Finance is a comprehensive encrypted financial service provider. It was officially launched in August 2018. It mainly provides encrypted asset deposits and loans, asset management, brokerage, derivatives trading and other financial services for high-net-worth qualified individual investors and institutional investors.
From the perspective of its lending business, it is mainly aimed at miners, cryptocurrency holders and investors, institutional investors, supporting Bitcoin and other mainstream cryptocurrency mortgages, as well as credit loans, and targeting institutional customers with large amounts of funds , PayPal Finance can also provide customized deposit and loan and income solutions.
Judging from the company’s progress, according to the official introduction, in March this year, the balance of PayPal Finance’s loans exceeded US$380 million . On March 5 this year, PayPal Finance announced the completion of the Pre-A round of financing and received investment from Dragonfly Capital and Parallel Ventures.
PayPal Finance’s lending products are mainly ” PayPal Loan “, which is divided into “regular loan” and “borrow and repay”. The product calculates interest on an hourly basis, the handling fee is 0.5% for each loan, and the interest is calculated based on the amount to be repaid. The estimated interest for “borrowing and repaying” is 0.166666 per ten thousand per hour, and the initial pledge rate is 60%.
The currencies that can be borrowed include USDT, USDC, PAX and TUSD four stable currencies, and the pledgeable currencies are Bitcoin and Ethereum.
In terms of asset security, PayPal stated that it will use offline multi-signature storage of private keys. At the same time, in certain business scenarios, the compliant third-party custodian Cobo Custody and the mining pool Poolin will participate in encrypted asset custody. At the same time, PayPal Finance stated that it will cooperate with professors from Peking University Guanghua School of Management to jointly establish a risk control model for encrypted asset lending.
Matrixport
Matrixport is a one-stop digital asset financial service platform. It was established in February 2019 and is headquartered in Singapore. It has launched a variety of products such as digital currency trading, digital currency custody, and pledged loans. More innovative products will also be launched.
From the perspective of Matrixport loan products, it is mainly divided into two types: basic loan and “zero interest loan”. Basic loan products support the borrowing of USDC, USDT, BTC, BCH, ETH, LTC, and support four pledge coins of BTC, BCH, ETH and LTC The basic loan amount is between 1,000 USDT and 200,000 USDT. Large borrowing needs can be purchased through customized products.
The loan period is divided into 7 days, 14 days, 30 days, 60 days, 90 days, 120 days, 180 days and 360 days. The pledge rate is 60% , and the pledge rate = (borrowing amount + loan interest + total penalty interest-paid amount) / pledged cryptocurrency valuation * 100%.
The loan amount is the amount of the loan currency, and the repayment amount calculated based on the denominated currency should be repaid upon maturity. When repayment, Matrixport will calculate the amount to be repaid in real time based on the price of the loan currency.
In terms of replenishment, users can turn on automatic replenishment or manual replenishment after lending. When the pledge rate is higher than 70% , Matrixport will remind the user to replenish the pledge in time.
May be liquidated when the open rules, when the pledge encryption currency prices, the mortgage rate is higher than 85%. In addition, if it is overdue for more than 3 days, it will be forced to liquidate. A risk reserve (risk reserve = principal and interest repayable (penalty interest) * 1%) will be accrued when the position is closed, and will be paid by the proceeds from the position.
When the pledge rate is higher than 85% and the value of the pledge is greater than or equal to 10 BTC, part of the pledge will be sold to reduce the pledge rate to 70% of the warning line. The pledge should be sold = (borrowing amount-pledge value * warning line/ (1-Warning line), the loan amount will be converted into pledge currency for calculation.
Basic lending products accrue daily interest. Loans and repayments are denominated in USD, and the actual loan and repayment currency is USDT. When the user repays the loan, the principal and interest are calculated based on the due. Early repayment does not reduce or exempt the interest receivable, and the interest should be calculated based on the due Pay the principal and interest. Loan interest = loan amount × annualized interest rate / 365 × loan period / day. According to the rules of penalty interest , if the payment is not repaid after the due date, the penalty interest will be calculated and collected based on the number of days overdue for the principal and interest of the loan at a daily interest rate of 0.055%.
In addition, Matrixport also provides zero-interest pledged loans combined with integrated option products, giving customers zero-interest loans without the need to cover positions. Lin Rong, Senior Vice President of Matrixport, pointed out in the online video summit of the “World Digital Mining Conference”, “The price of BTC at the end of the period Locked in a customized limited price range. The goal is to effectively help customers avoid liquidation in the event of large market fluctuations.”
Tiger Symbol
Hoo.com is a public chain asset cloud platform that supports multiple digital encrypted currency transactions. According to the official introduction, Hufu’s business covers exchanges, wallets, Hufu Mining, and Hoo Custody. Product functions include digital asset spot, futures contract trading, equity trading, digital asset deposit and interest generation, dual-currency wealth management, pledge lending, digital asset custody, and Hufu co-management. Hufu officially launched Hufu pledge lending on August 29, 2018.
Based on the data on October 28, 2020, Hufu pledged lending supports a total of 14 currencies: USDT, BNB, BTC, ETH, EOS, HT, GT, OKB, HC, LTC, BCH, BTM, DOGE, TRX Among them, the daily interest rate for borrowing BNB is the highest, and most currencies have a daily interest rate of 0.05%.
The pledged currencies are USDT, PAX, BTC, ETH, EOS, BNB, HT, BCH, LTC, OKB, DAI, CKB, HC, MOF, a total of 14, with the highest pledge rate of 75% and the lowest pledge rate of 30%.
The loan funds of Hufu pledged loans mainly come from Hufu Wealth Management . By absorbing the wealth management funds invested by users, the pledged borrowing users are loaned, and then the loan interest income is obtained. Part of this income is used as the expense cost of wealth management interest.
Wallet, custodian
HyperPay
HyperPay is a digital asset wallet that integrates custodial wallets, self-managed wallets, co-managed wallets, hardware wallets and other services. It also has wealth management, currency transactions, legal currency transactions, lightning exchange, mortgage lending, market tracking, multi-signature co-management, and assets. Hosting, merchant payment and other functions.
HyperPay first registered in Melbourne, Australia, in 2017 to start HyperPay digital wallet program, and in February 2018 formally launched its encryption lending products as “currency loans treasure”, according to official reports, the total turnover of more than $ 8.5 million, primarily from gains Interest to the borrower.
When the currency price drops sharply (the warning line is the risk of closing position=120%), the wallet will automatically send out an early warning reminder. HyperPay will remind the user to check the account position and selectively add mortgage assets to prevent the asset from reaching the closing line ( Risk rate = 110%) and was forced to liquidate.
If the market value of the mortgaged assets of the borrower drops too low due to market fluctuations, HyperPay will force the sale of the mortgaged assets and repay the USDT and CNYT obtained.
Liquidation risk ratio = mortgage assets/(borrowed assets + interest). If the market price fluctuates too much, there will be a risk of forced liquidation. After closing the position, 3% of the remaining amount after the repayment (principal, interest and liquidated damages) will be charged as the closing service fee.
Coin wallet
Established in September 2019, Blockinwallet is a Singapore financial service platform under the Binin mining pool. Its customer base is mainly for miners and wallet users. It is currently applying for MAS compliance supervision.
Biyin Mining Pool was founded in November 2017 and was established by the original core team of BTC.com. It supports mining of all mainstream currencies. Its computing power for BTC, ZEC, LTC and other currencies often ranks first.
Biyin Wallet’s loan products are mainly two types of “flash loan” and “term loan”. The available currencies are USDT and NUSD. The pledgeable assets are BTC and ETH. The pledge rate of the two products can be 10%. -The 67% is adjusted by the customer, and the automatic additional BTC pledge and automatic interest repayment can be set.
Among them, “Flash Loan” has a longest loan period of 360 days. “Term Loan” is divided into 30 days, 90 days, 180 days and 360 days, and the service fee is 0.3%.
Exchange
From the perspective of exchange pledged currency, such demand mainly comes from the “borrowing money and speculating currency” of trading users. The exchange’s loan business is mainly for the platform to better attract traffic and attract more encrypted assets and users. Look, the three major domestic exchanges all have currency-related businesses.
From the user’s point of view, the exchange’s currency lending service can open up internal capital accounts and make transactions more convenient. If there is insufficient funds, there is no need to borrow money for transactions, and only pledge lending and speculation between accounts within the exchange Although currency is relatively convenient in operation, it is virtually equivalent to trading with leverage , which increases speculation-related risks.
Binance
Currency Ann in March 2020 launched the “Pledge to borrow money” product, platform, registered users can use the collateral to borrow money business, lightning arrival, interest is calculated according to the number of days, partial day counts as one day interest rate used corresponds follow when borrowing interest rate.
The loan period ranges from 7 days to 90 days. When the pledge rate reaches 75%, Binance will notify the user to cover the position, and when the pledge rate reaches 83%, it will trigger automatic liquidation .
Binance Loan has added a grace period for users, allowing up to 3 days overdue (7-day and 14-day loan period) or 7 days overdue (30-day and 90-day loan period). During the overdue period, 3 times daily interest will be charged. Pledged borrowers need to pay overdue interest to the platform. If the overdue period is exceeded, the platform will close the position and repay the loan.
It is worth mentioning that Binance ’s pledge lending business has successively added support for some popular DeFi tokens such as DAI, UNI, etc. As of press time, Binance’s loanable currencies are BNB, BUSD, DAI, FLM, JST, LINK, NEO, ONT, STOR3, SXP, UNI, USDT, a total of 12, the pledgeable coins are BCH, BNB, BTC, BUSD, EOS, ETH, LINK, LTC, XRP, XTZ, a total of 10.
OKEx
OKEx launched the C2C lending function on the APP on March 19 this year, providing users with personal-to-person free lending services. Currently, the web-side lending function has also been launched. Users can transfer assets to lending accounts and borrowers can pledge BTC , Choose the pledge rate, daily interest rate and loan duration, and publish loan advertisements to raise USDT publicly ; investors can choose appropriate loan advertisements to invest in USDT in the loan market.
Up to now, OKEx’s loan service supports five pledge currencies: BTC, ETH, OKB, LTC, and BCH, and the supported currency for fundraising is USDT. Support the borrower to set freely according to 7 days, 15 days, 30 days, 60 days, and 90 days.
In OKEx C2C lending service, the minimum limit for USDT borrowing and investment amount is 200 USDT and the maximum is 100 W USDT.
The borrowing interest rate is customized when the borrower publishes the borrowing advertisement. The daily interest rate is between 0.01% and 0.098%, and the borrower refers to the market mechanism to set it.
Huobi
Huobi’s C2C lending function started its internal test on March 20 this year. The C2C lending service for HT holders was launched on June 4, and the leveraged tiered lending quota was implemented. The level of the leveraged tiered quota is the tier of user currency transactions. grade.
It is worth noting that the fire C2C currency by currency services available to users of digital asset lending and borrowing of matching services, divided into lending money and earn C2C leverage (borrowing) two sub-services, like lending “to lend money to earn” service Although trial operation has been conducted, it has not been officially announced.
Among them, Huobi C2C leveraged currency lending services currently support USDT, BTC, ETH, XRP, BCH, EOS, HT, LTC, LINK. Huobi will monitor the account risk rate of borrowing users, and when it is lower than 110%, the currency will be forcibly returned. Users can specify the Japanese currency interest rate within the guidance range. The current Japanese currency interest rate guidance range is 0.0100%-0.0980%, which will be adjusted based on market conditions in the future.
summary
The pledged lending of cryptocurrency borrows from the credit of the traditional financial system. Credit as an auxiliary tool has always played an indispensable role in the entire financial system. Through some innovative lending policy tools, financial resources can be effectively guided into important sectors of the real economy. Maintain reasonable and sufficient liquidity and promote the stability of overall market interest rates.
CeFi crypto lending creates more liquidity and asset allocation opportunities for investors with different needs. It is also an indispensable part of crypto finance. Although there are still many risks in this process, it also encourages investors And the entire industry is moving towards a more complete financial management.
