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Breaking News: FTX Recovery Trust Set To Disburse $1.6 Billion By Month-End, FTT Price Skyrockets

How Coinbase Bitcoin Collateral Loans Could Promote Long-Term Holding

Tony "The Bull" Severino
Tony "The Bull" Severino
1 year ago
3 mins read
bitcoin coinbase collateral crypto loan

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It was recently revealed that Coinbase would soon introduce collateral-based loans taken out against Bitcoin holdings in exchange for instant cash.

The product is a great move by the crypto exchange, allowing it to compete against BlockFi and others in the lending space. But it also may have a side effect that promotes Bitcoin holders to keep on holding for the long term. Here’s why.

Coinbase To Offer Collateral-Based Loans On Crypto

Cryptocurrencies emerged due to Bitcoin’s creation and the rise of alternative forms of digital finance. And what started out as just one cryptocurrency designed to act as the first all-digital form of peer-to-peer cash, was born into an entirely new industry.

Crypto assets now come in all sorts of different types and forms, and which has brought about a new dawn of decentralized finance. DeFi isn’t just a buzz word. Although it is certainly red hot right now, perhaps overly so, but it is a true, sustainable trend building real-world value.

Related Reading | Ethereum Beats Bitcoin, Gold, and Stocks In Stimulus Check Investment

The recent DeFi craze has put the spotlight on crypto-based lending. Assets like Compound allow crypto token holders to lend out their assets for an APY return.

Some companies also allow users to take loans out against their own crypto assets for quick cash.

Popular San Francisco-base Coinbase, will soon be one of those companies, according to a recent announcement. Coinbase revealed they will be offering their customers the ability to borrow as much as 30% of their BTC holdings, up to $20,000 at a rate of 8%.

Holders are only required to make monthly payments on interest, leaving principle up to them to decide when to tackle. After all, it is your own assets you are borrowing against.

This is an enormous benefit for customers, but it also could ultimately be a major boost for Bitcoin.

btcusd bitcoin

BTCUSD New Uptrend On the Way? | Source: TradingView

Why Holders Will Be Less Apt To Cash Out Bitcoin Thanks To Collateral Loans

Everyone has been through tough times and needed some cash faster than a paycheck would provide. Banks offer personal loans, credit cards have cash advances, or you could cash out some assets by pawning your gold or exchanging some Bitcoin for USD.

Moving forward, in those unfortunate events, crypto holders will be less apt to cash out their Bitcoin, and could instead consider taking a loan out on their holdings. This would allow the crypto investor to potentially pay off the loan itself with any price increase in the asset.

Related Reading | Economist: Early Days of Bitcoin Uptrend Are Here, Breakout Has A Long Way To Go

This sort of phenomenon taking place in an incredibly scarce asset supply-wise could have a dramatic impact on prices, helping to remove one reason for selling Bitcoin from the overall equation.

What will remain, are investors who sell the asset simply to take profit, which data suggest is slowing by the day with holders expecting higher valuations in the months ahead.

On the negative side, there will always be a subset of holders that abuse this being at their disposal, and will likely result in loans being taken out against Bitcoin, solely to buy more Bitcoin.

Such a strategy could work out in someone’s favor due to the asset being close to a new uptrend. However, it could ultimately backfire and cause a lot of issues. Like any loan, it will be up to the party involved to stay responsible and pay down their loan. But even this irresponsible and risky strategy would also boost Bitcoin by taking more supply out of the market amidst the growing demand.

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Tony "The Bull" Severino
Tony "The Bull" Severino

Tony "The Bull" Severino

Tony "The Bull" Severino, CMT, is a distinguished figure in the cryptocurrency analysis sector, renowned for his in-depth technical expertise and innovative approach to market trends. As the Head of Research at NewsBTC, Tony leads a team dedicated to providing cutting-edge insights and forecasts, helping both novice and experienced traders navigate the complexities of the crypto market.
A seasoned Chartered Market Technician, Tony's prowess in identifying and capitalizing on market patterns is unmatched. His academic and professional journey in market analysis has firmly established him as a leading authority in technical trading strategies. Tony’s approach is heavily influenced by the principles of Elliott Wave Theory, a method known for its rigorous assessment of investor psychology and price movements.

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Beyond his role at NewsBTC, Tony is the visionary founder of CoinChartist.io, an educational platform aimed at demystifying the nuances of cryptocurrency trading. CoinChartist.io serves as a valuable resource for traders seeking to enhance their technical analysis skills. The platform offers a range of learning tools and resources designed to empower traders with the knowledge to make informed trading decisions.

In addition to his educational initiatives, Tony is a prolific author and a dominant voice in the crypto community. He writes the CoinChartist VIP newsletter, a weekly dispatch that has become a staple among crypto enthusiasts, revered for its insightful analysis and actionable trading advice. This newsletter has consistently ranked as a best-seller on SubStack, boasting thousands of subscribers who rely on Tony’s expertise to guide their trading strategies.

Tony is also celebrated for his literary contributions to the field. He is the author of the highest-rated Crypto Trading Journal on Amazon.com, a testament to his ability to communicate complex trading concepts in an accessible manner. This journal is widely regarded as an essential tool for traders aiming to track their progress and refine their strategies.

Before his ascent in the financial analysis world, Tony honed his skills in journalism. His background in this field has endowed him with a unique ability to present intricate market dynamics in a clear and compelling manner, making his insights highly sought after by a broad audience that ranges from casual readers to professional traders.
His professional affiliations underscore his commitment to excellence and continuous learning. As a partner of Elliott Wave International and TradingView, Tony collaborates with other leading experts to enhance his knowledge and skills. His active membership in the CMT Association further aligns him with the highest standards of industry practices and ethics.

Tony’s nickname, "The Bull," aptly reflects his aggressive and optimistic outlook on the cryptocurrency markets. His forecasts often anticipate significant upturns, earning him a reputation for bullish predictions that have frequently led to lucrative outcomes for those who follow his advice.

In summary, Tony "The Bull" Severino, CMT, is more than just a technical analyst; he is a mentor, educator, and innovator whose influence in the cryptocurrency space continues to grow. His dedication to advancing the understanding of market forces and his commitment to providing high-quality, reliable analysis make him a pivotal figure in the world of cryptocurrency trading.

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Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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Reason to trust

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Created by industry experts and meticulously reviewed
The highest standards in reporting and publishing
How Our News is Made

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