Why bitcoin is used as collateral for loans

There are numerous reasons for using bitcoin as collateral for loans. The most common are for leveraging up on existing crypto positions, arbitrage plays, market-making and covering operation costs without selling any holdings.

There are several reasons for why crypto lending has grown over the years. First of all, the world of digital assets enables a fast, easy, and uncomplicated loan process, which is much more appealing than going through a bank and mountains of paperwork. These collateralized loans are also available for anyone that can fulfill the collateral requirements. No credit checks or evaluations from your bank, making lending available for a broad range of people. These are also available worldwide, and you don't need a personal relationship with your local bank to get a loan. A new, digital and borderless lending market is emerging.

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Banking on Bitcoin - The State of Bitcoin as Collateral

Bitcoin's unique properties make it the perfect collateral asset. This report covers how bitcoin is used as collateral today through exclusive data. We describe the current market across lending, derivatives, and DeFi, including predictions on future adoption.
Feb 24th 2021