“Bitcoin Loan Market Set for Growth”

 

If you have been keeping up with the world of finance and crypto, you are probably aware of crypto lending. It is, at its core, a simple concept to grasp. Borrowers can use their crypto assets as collateral in order to acquire a fiat or crypto loan. Lenders, meanwhile, provide the assets that are necessary for the loan at an established interest rate. This process can also work with the roles flipped; borrowers can use fiat or crypto as collateral as a way to borrow crypto assets.

 

Bitcoin, the biggest name in the crypto space, acts not only as a form of currency but also as a store of value. It can function as collateral for a loan, not unlike other assets. Recently, Bitcoin has seen impressive progress in its growth, evening reaching a specific milestone. In December of 2020, the market capitalization of Bitcoin achieved an all-time high of over USD 100 billion in comparison to the summer months.

 

Growth in capitalization and popularity

 

Bitcoin’s market capitalization was approximately USD 1 billion in 2013. Years later, since its 2017 spike in popularity, it has grown several times that amount.

 

A Bitcoin loan shares similarities with a conventional bank loan. Where it diverges is the fact that it has strenuous credit checks, no terms are connected to the money, and there are no differences in interest rates. Most of the risk is not with the lender but instead with the borrower. This is because the borrower offers enough bitcoin to completely cover the loan as well as the interest payments. Generally speaking, Bitcoin loans are an ideal method of quickly obtaining money.

 

There are plenty of reasons as to why these loans are gradually gaining an audience. Some may be looking to pay off credit card debt at unreasonably high-interest rates. Others may be wanting to pay for unforeseen emergencies. It doesn’t matter what the reason is. Bitcoin loans generate faster than traditional loans and paperwork is less important due to creditworthiness not being a factor.

 

What impacts the market?

 

There are two key influencers of the market trend. One is fluctuations pertaining to monetary regulations. The other – and this one has a significant effect – is the increase in public awareness about Bitcoin loans. Much like how cryptocurrency grew in popularity over time, a boost in the number of people aware of this type of lending has an impact on its prominence. Similarly, it gauges its level of success.

 

Recurring market drivers include the inherent transparency of distributed ledger technology (i.e. blockchain). There is also the tremendous cost of cross-border payments and high remittances in developing countries.

A study from Advance Market Analytics on the global Bitcoin Loan Market provides more details about the factors that influence the global business scope.