How Crypto Lending Has Grown
See why more people are now aware of how crypto lending works and its benefits and therefore investing heavily in it.
Crypto lending has grown exponentially over the last few years. Although many people doubted it in its initial stages, most are now warming up to the idea and investing in it. If you don’t know much about crypto lending, don’t worry. We will discuss some basics and explain how it has grown. So, read on to learn.
Crypto lending is usually done on crypto lending platforms. The platform is responsible for handling transactions between lenders and borrowers and ensuring everything happens as planned.
How Big Is the Crypto Lending Market and How Has It Grown Over the Last Few Years?
Lending is a large and popular part of traditional finance, as it makes it easier for people to get money to fund businesses and personal needs. This is also the case in the crypto-backed lending industry.
The crypto lending market hit $8 billion in 2019. This number has increased by over $2 billion in the last couple of years. The global peer-to-peer lending market that hosts even private lending portals such as Prosper, Funding Circle, and LendingClub is bigger, with its volume reaching $85 billion.
For instance, Genesis Capital, a renowned crypto lending platform, released a report indicating they doubled their loan originations from $1 billion to $2 billion since the last quarter. Their active loans also hiked by 20% since the previous quarter. Their track record enabled them to attract huge institutional investors, ensuring even more growth.
Factors That Have Helped the Crypto Lending Market Grow
Crypto loans are usually processed much faster than traditional loans. This attracts many borrowers, enabling the crypto lending industry to grow tremendously. Crypto loans are also easier to get than bank loans that must check your credit score to qualify you.
The current demand for coins such as Bitcoin enables lending companies to offer high-interest rates. This compels many crypto holders to lend their digital assets to earn interest.
There is also an increase in new crypto lending platforms due to their significantly lower operational costs. These new platforms can offer high-interest rates and attract more customers. This makes it easier for them to bring in more clients, resulting in more crypto traders joining the industry.
Pros of Crypto Lending
It gives people with poor credit scores an equal chance to get loans to fund their crypto projects.
You don’t have to sell your digital assets to take a crypto loan, as you can just use them as collateral and then borrow the amount you need. The digital assets used as collateral may also have increased value when you get them back.
Loans are processed fast, and you are allowed to take even up to 50% of your crypto collateral’s value.
Cons of Crypto Lending
Your crypto assets may lose some value. When this happens, you may be forced to pay more collateral or immediately repay the loan. If you can’t do so, some lenders might sell some of your crypto collateral to cover the loss.
You can’t trade with the money used as collateral until you repay the crypto loan.
The cryptocurrency you have may not be eligible for a loan, forcing you to convert to the accepted crypto. The transaction will also cost you.
If you don’t use an insured crypto lending platform, you risk losing your hard-earned money.
So, Should You Borrow a Loan to Invest in the Crypto Lending Space?
As aforementioned, anything can happen. However, that should not discourage you from investing in crypto lending. If you understand the benefits and risks involved, you are good to go. Therefore, ensure you first thoroughly research both crypto lending and the lending platforms you want to use. That way, you have enough information before moving further and know what you’re exactly getting into.
Crypto lending has really changed the crypto industry over the last 3 years. More people are now aware of how it works and its benefits and are therefore investing heavily in it. However, there is still a huge demand for crypto loans, so crypto lending may become even bigger in the next few years.