Such as RenRenbit, Coin Wallet; exchanges such as OKEx, Binance and Gate.io. As mentioned above, OKEx’s lending business has been quietly launched recently, while Binance and Gate.io have activated the withdrawal function when providing leveraged borrowing, which means that users can realise the use of 66% of the principal of the loan (Binance). According to a lender’s analysis, the exchange is likely to do this to serve the needs of customers, otherwise customers who want to borrow are likely to withdraw money and pledge to other platforms.
Shen Yibo is a large borrower who has experienced multiple products. He said that he uses lending products and mainly focuses on three aspects of the lender’s indicators-the security of the lending platform or the pledged property, the interest rate, the pledge rate and the strong line.
Directly related to security is the reputation of the platform and how it is hosted. In this regard, domestic lenders have slightly different advantages.
PayPal Finance is endorsed by strong investors such as Zhenge Fund and Lightspeed China. The escrow department uses offline multi-signature to store private keys. In some business scenarios, it will cooperate with the compliant third-party escrow agency Cobo / Onchain. Create a co-managed wallet and provide users with an observing address to store pledges.
MatrixPort’s escrow is its own “bank-level” multi-signature management solution (“physical security at the vault level, distributed across three continents”). At the beginning of the launch, it claimed to have “securely managed billion-dollar assets (should be Bit The assets of various businesses under Continental). ”
But when it comes to the scale of fund custody, Binance, OKEx and other exchanges are naturally larger. Binance also has the reputation of “100% compensation after the theft of coins”. From this point of view, its security should be the highest among currency loan companies. However, the digital currency leverage is prone to short-term pins, which can cause users to liquidate positions, which has weakened the security of using exchange leverage to borrow to a certain extent.
Under the circumstance of little difference in platform security, the differences in interest rates, pledge rates and leveling lines have become the main aspects of user inspection.
The interest rate determines the cost of capital use. In this regard, the interest rate for borrowing stable currencies such as USDC on exchanges such as Binance is the lowest (7.6%), and the lowest interest rate for borrowing unstable currencies such as BTC (3%) .
According to the person in charge of a brand lending business, due to the small fluctuations in USDT and the excessive fluctuations in assets such as BTC, borrowers generally borrow stable currencies such as USDT.If the currency rises after 1 month, the borrower will have to spend more money to buy the currency to repay, the risk is uncontrollable. As a result, “preferential policies” for borrowing BTC at low interest rates have appeared on platforms such as Cointrust.
“This is a good tool for users who want to use leverage short.” The person in charge added.
It is worth noting that Bitmain ’s MatrixPort is similar to an exchange. Users will deduct a fee when withdrawing money, and a BTC-based fee when borrowing. Once the transaction is charged, a user jokes that his It is a “decapitalization” (the lender lends 100,000 yuan to the borrower, but the 20,000 service fee will be deducted directly when the borrower is paid).
Lastly talk about the pledge rate. The pledge rate and the flat line determine the amount of funds that the principal can leverage and the safety threshold.
For example, the pledge rate of borrowing BTC on RenRenbit’s “Lightning Loan” is 60%, which means that 1 BTC can lend 0.6 USD of equivalent BTC.
But assets such as BTC, which are pledged, often fluctuate too much. For example, 1 coin is worth 10,000 US dollars when mortgaged, and the lender lends 6000 USDT. After two weeks, Bitcoin is cut (valued at 5000 USDT). Don’t lose money? To avoid this risk, lenders will set up pledge rate warnings and leveling lines.
Take PayPal as an example, its initial pledge rate is 60%. When the currency price drops, the pledge rate will rise (pledge rate = loaned funds / real-time value of collateral). When it rises to 85%, PayPal The customer will be reminded to increase the pledged goods to make up the warehouse, reduce the pledge rate, or directly repay in advance. If the customer does not act, PayPal will sell and liquidate the collateral at the current price when the pledge rate rises to 90%. The final asset that was forcibly liquidated was used to make up for the borrower’s outstanding interest and short-term market volatility brought about by the risk of crossing positions.
Among the above-mentioned lenders, the pledge rate and the strong line of the currency letter are the highest.
As mentioned above, lowering the pledge rate is to reduce the risk of users being forced out when encountering violent market conditions, and lowering the leveling line is to protect the interests of the platform. However, Binance’s risk control in these two aspects is quite bold.
A business staff member of Binxin explained, “There are many users who do not hate risks. We provide such users with a high pledge rate and lend more funds. The pledge rate is only 95%. Binance has aggregated the depth of major transactions, and so far there has not been an extreme market for us to go through. “
Development prospects of the lending market
From the supply side, lending products are relatively abundant and complete. In the future, whether the market can grow depends on whether there will be continuous demand from the lending end.
Because the largest borrowing group with clear portraits is still miners, it is necessary to talk about the mining revenue, and the two factors behind the currency price and computing power.
“If mostRecently, the demand for mining machinery instalments for mining can explode, and the size of the lending market will double in just one or two quarters. ”Flex Yang estimates.
In this regard, old miner K is not optimistic.
Old K believes that today the price of mining machines has reached a new low. The more “concessional” the manufacturers are, the worse the sales situation and the more pessimistic the market. “At this time, people give you the opportunity to mine debts, unless you are confident about the currency price and the difficulty of the entire network for a long time in the future, and feel that the net income of mining minus the repayment amount + interest and a surplus, you borrow .Otherwise, when you have huge debts, your earnings will be halved again, and it will be difficult to say that you are in bankruptcy. “
It is true that in this market that depends on the sky (currency price) to eat, and every half of the variables, it is prudent to increase leverage.
But Old K also pointed out some opportunities in the lending business in mining.
For example, some large miners are aware of the decline in the price of the currency and some people leave the market, so the borrowing demand for capital turnover will be generated in the process of the mining machine or even the mine.
Flex Yang also agrees with the opportunities offered by different nodes in the mining industry. At the beginning of 2019, many users borrowed from PayPal to lay out the flood season.
In addition, continuous exploration and innovation on the asset side is also a bargaining chip to attract incremental funds and expand the market.
Paypal has tried this.
“As far as we know, foreign digital currency borrowing rates are low, so we will cross-regional borrowing with foreign lenders, thereby reducing the cost of the capital supply side (source of funds), thereby reducing the interest rate level of the lending product “Said Flex.
According to Flex, from the beginning to the present, its interest rate has basically dropped from 15% to 10%, a decline of more than 30%. Later, the cheap funds it received from abroad flowed to peers through interbank borrowing, which could theoretically reduce the overall borrowing cost of the industry.
Under the competition and cooperation of the same industry, we have reason to believe that the scene and products of the lending market will become more abundant and user-friendly. The vast cryptocurrency market still has a large market space for the emerging lending products.
Under the development of the market, Odaily Daily also reminds investors to choose relevant products carefully and be alert to risks.
On December 27, 2019, the Beijing Securities Regulatory Bureau listed some related businesses in the further reminder of the risk prevention of virtual currency trading activities.
“Recently, some virtual currency trading platforms have provided virtual currency transaction services to domestic residents, launched zero-interest loans, dual currency wealth management and other projects through digital currency mortgages, which seriously violated the” About Preventing Token Issuance “issued by the seven ministries and commissions including the People’s Bank The “Announcement on Financing Risks” is suspected of engaging in illegal financial activities and disrupting the economic and financial order. “The notice states.
Dual currency wealth management, zero interest lending, etc.”Product yield” products require investors to be vigilant and discerning, and to brighten their eyes. We must also be vigilant against the scams that “in the name of investment and financial management, operate in a dark box and run the road.”