Taking out a Loan in a Bear Market


The crypto markets are currently experiencing the greatest upwards shift that we have ever seen. Practically every coin and token has set a new all-time-high within 2021, and some have set several all-time-highs over these months. Bitcoin has reached a staggering $60,000, and Ethereum has reached $3,400. We are very clearly experiencing a long-term bull market.


But bull markets do not last forever, and arguably, the crypto industry is a little overdue for a correction in its prices. Eventually, the markets will turn the other way, and realistically a bear market could get triggered at any moment. For long-term holders, this will hardly matter, as they never intend to sell their finances anyway, but day-traders could very well get caught in the crosshairs.


Usually when bear markets occur, people consider doing one of two things: holding or selling. However, there is a third option: taking out a crypto loan. Here are a couple of the reasons why getting a crypto-backed loan is a worthwhile option during a bear market:


Get fiat for your crypto without leaving your position


Even during a bear market, there are people who would rather hold onto their money for fear of losing their position. Many people spend a great deal of time, effort, and money accumulating a certain position in the crypto market, and while bear markets can tempt people to leave, plenty of people take the risk and continue. The good news about taking out a crypto loan is that you can keep your position whilst still getting fiat, as the crypto you use for collateral is kept on a cold-storage wallet where it is never sold or traded with. This means that you can use the fiat that you borrow to make real-world payments instantly, and then simply buy your crypto back at the end of the borrowing period (or beforehand). This can give peace of mind, especially if you fear that the market might tank.


Consider also that CeFi loan providers such as Helio never use margin calls, so you do not need to worry about your collateral being unfairly depleted. With that being said, do consider that if the market for the asset you used as collateral falls significantly, then it may trigger a Put Option, where the loan provider will sell your assets. However, keep in mind that this would only ever occur if your crypto drops so significantly that its worth is put into question, and at that point there is a high likelihood that you (as the borrower) would not even want the crypto back. In this case, the loan provider would sell the crypto themselves, relieving you of your duty to pay.


Crypto loans reduce the stress of a bear market


Knowing that you have already collateralized your crypto to get a fiat loan can be a calming thing, as it means that no matter what happens in the market, you have managed to accumulate some fiat from your assets, even if it is only for the period of the loan itself. One of the most stressful aspects of crypto trading is that you never know if your money will ever get converted to fiat, as a great many people leave their assets on the market without ever being able to practically use them. However, if you take out a crypto loan, then no matter what happens afterwards, you can rest assured knowing that you were able to put your finances to use.