Deribit Now Offering Fiat Loans With Cryptocurrencies as Collateral
Deribit, an important exchange handling Bitcoin futures and more, the company’s new state of the art project is now granted investors the ability to acquire fiat currency loans and offering their own cryptocurrencies as collateral. Those that are gathering numerous amounts of cryptocurrencies, or hodling, will acquire fiat from the platform as they deposit their coins.
How Deribit’s system works is that individuals looking to acquire cash loans from the company would deposit cryptocurrencies which act as collateral for the loan. If one person needs $50K as a loan in fiat, a possible crypto-deposit of almost $125000 may be required and will act as collateral for the loan.
On the other hand, should cryptocurrencies see severe plummets in their price, clients may have to deposit additional coins to pay off the loan or top off its collateral. Deribit’s system holds several beneficial features to distinguish itself from others such as providing derivatives which assist in safeguarding deposited cryptocurrencies as a kind of failsafe option for sudden and significant drops in value. Through this method, both parties walk away with benefits.
Deribits put options provide incredible benefits for those receiving loans. A $50000 loan could also be accompanied a 14% percent interest on a yearly basis. The amount of money an individual may deposit for a loan by the end of this year is around $1500 with a 7% interest rate yearly.
This key feature is incredibly promising for borrowers given that should a huge drop in price occur, those receiving their loans are not required to provide additional crypto to replace the loss despite a possible increase in interest on a yearly basis up to 17%.
Currently, deposits can only be made through BTC, although more cryptocurrencies will be added. The high-interest rates continue scaring off potential clients although the company’s Deribit put options solution promises to introduce more parties to the market.
The platform was launched in 2016 by four distinct individuals, including John Jansen, Marius Jansen, Sebastian Smyczynski and the fourth being Andrew Yanovsky as part of a 4-way ownership. Deribits initial purpose was bitcoin futures contracts and a site for trading options but has now become a loan providing service.