By Michael Scott
Borrowers shall be permitted to stake their coins in a move reinforcing loans designated in another.
Bitget intends to introduce a cryptocurrency loaning initiative for users to allow them to stake coins in exchange for loans in another. According to the derivatives trading program, followers disgruntled by traditional lenders are the major targets of this program.
Bitget’s managing director, Gracy Chen, claimed that the loan program is aimed at enabling them to expand their investment portfolio past the coins they presently hold. Via a press release, he said that the crypto exchange platform’s new product depicts the collateralized currency utilization’s plasticity, which enhances capital use. Currently, staking less-demanded coins is possible, thus enabling users to acquire loans in more liquid assets for investment.
Dual Coin Crypto Loans Boost Liquidity
Via the Crypto Loans program, borrowers will acquire the opportunity to acquire loans using coins in a similar amount denominated in another coin. Further, every loan possesses a particular rate of interest linked to it, and the market value of the staked collateral aids in determining the amount that one can borrow.
In Ethereum-founded tokens, Staking is a regular process. These tokens are founded on cryptocurrency authentication across a blockchain’s different nodes. Awards are provided to distinct validators based on the staked amount, including those that delegate their crypto to them. In most cases, more passive investors favor this process.
The move by the Seychelles-founded platforms comes amid the digital lending market experiencing events that boost profits and revenue. An Allied Market Research report reveals that in 2022 the market size was $12.6 billion. It predicted that before 2022, the market would grow to $71.8 billion. Bitget cited another report by Global Market Insights, revealing that by 2032, the digital lending market would be valued at $60 billion.
Digital Lending Decision Fast to Execute
A March 2023 report by the United States Government Accountability Office shows that digital lending decisions are faster than traditional ones and can take days rather than weeks. Concurrently, hacking and fraud risks are attached to digital lending. Prolific failures are also common in the digital lending industry.
Last June, Celsius, a crypto lender, filed for insolvency after liquidity problems resulted in the suspension of client withdrawals. Besides, it was also left struggling to repay debts.
Some months later, in November, FTX, a crypto exchange, collapsed, occasioning crypto lender BlockFi’s failure. In January, Genesis, another crypto lender, also filed for insolvency amidst national regulators enquiring about securities scheme violations and the subsequent ripple effects associated with FTX’s fall.
Despite these setbacks, successful crypto lending stories are still there. For instance, in December 2021, Fidelity and crypto lender Nexo partnered to offer digital assets to institutional investors. Following Celsius’s insolvency, Nexo strove to depict how it would evade immensely risky loans as its competitor did.
Bitget Onboarding Processes Deployed by Traditional Lenders
Bitget has clearly intended to model the onboarding process on traditional lenders’ existing procedures. In addition, the organization has insisted that it has interventions to safeguard borrowers’ collateral from risks.
In March, the crypto exchange platform declared that it had partnered with Space and Time (SxT) to create a decentralized data warehouse that will provide a confirmable protected audit trail. Previously, it also included a section to its site referred to as the ‘proof of reserves’ to enhance visibility into the assets held on the platform.