Unlock the Power of Your Bitcoin Holdings
Get Instant Liquidity Without Selling Your Crypto
Coinbase users can now tap into the value of their bitcoin holdings without selling a single coin. The cryptocurrency exchange has launched a new service that allows users to pledge their bitcoin as collateral to take out a loan worth up to $100,000 in USDC stablecoins.
How It Works
The loan process is integrated into the Coinbase app, but the loan itself is serviced by Morpho, a decentralized finance (DeFi) platform built on the Coinbase-developed Base blockchain. This means that users can access the loan service directly from the app, without having to navigate multiple platforms.
Benefits of Bitcoin-Backed Loans
Using bitcoin as collateral offers a unique advantage: it allows users to raise money without triggering a taxable event. This can be especially beneficial for those who want to hold onto their bitcoin for the long haul. Additionally, the loan service offers flexible repayment terms, with no fixed monthly payments or due dates.
Understanding the Risks
However, it’s essential to understand the risks involved. If the value of the loan exceeds 86% of the value of the bitcoin held as collateral, Coinbase may require additional capital or liquidate some of the bitcoin holdings to repay the loan. This means that users need to be mindful of market volatility and ensure they have sufficient collateral to cover their loan.
A New Era of Crypto Lending
Borrowing against bitcoin holdings has been a staple of the crypto industry for years, offering users a way to access liquidity without selling their assets. However, the use of DeFi platforms like Morpho introduces a new level of transparency and security to the process. By leveraging smart contracts and blockchain technology, users can benefit from greater control and flexibility over their loans.
Protecting Your Assets
To mitigate the risks associated with crypto lending, Coinbase has implemented measures such as “liquidation warnings” to inform users of potential issues. Additionally, the use of a DeFi platform like Morpho helps to reduce the risk of centralized failures, which have plagued the industry in the past.
Take Control of Your Crypto
With this new service, Coinbase users can unlock the full potential of their bitcoin holdings, accessing instant liquidity without sacrificing their long-term investment goals. By understanding the benefits and risks of bitcoin-backed loans, users can make informed decisions about their crypto assets and take control of their financial future.
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