Today there are not that many situations in which people actually need to take out an actual Bitcoin loan. As in you borrow Bitcoin, pay interest in Bitcoin, and repay Bitcoin. There are many cases in which Bitcoin used as a payment method makes sense for loans with its ability to be sent around the world and across borders quickly. But, there are not that many cases when you want your loan denominated in a volatile asset like Bitcoin. However, as cryptocurrency adoption continues and as it's used more as an actual currency more and more reasons to take out a bitcoin loan will come up. Some examples today are:
Bitcoin Business Loans
While there are thousands of fiat businesses that accept Bitcoin, there are still very few businesses that 100% based in Bitcoin. Meaning their revenue, expenses, and profit are all Bitcoin. But they do exist in growing number every day, such as Bitcoin equipment suppliers, consultants, and exchanges to name a few.
No Margin Call Trading Loans
Trading with leverage is a great way to get rich or go broke, with the later happening more than the former. Trading cryptocurrency with leverage is an even better way to go broke. Cryptocurrency is a very young, relatively small, and extremely volatile asset class. And with that extreme volatility comes margin calls on leveraged loans when you borrow from an exchange. For a long term trader, this adds the risk of their long term position being sold at a top or bottom opposite their trade. A Bitcoin loan can avoid this risk of liquidation. A Bitcoin loan turned into fiat is an effective way to short the currency long term.
Over the Counter Bitcoin Trader loans
OTC (Over the Counter) trading in cryptocurrency is a booming business. For those new, over the counter trading means trades outside of exchanges directly between 2 parties. The trades are usually different from regular trades in that they are either very large or done in cash. Very large trades benefit from OTC in avoiding exchange fees or price movement from their large trade. Cash trades benefit from relative anonymity of doing the exchange outside of a platform. There are multiple scenarios in which a Bitcoin loan makes sense for this type trading such as the inability for a trader to get a fiat loan for this type trade.
How to get a Bitcoin Loan
You have other cryptocurrencies you can use as collateral.
Our top places for margin lending are
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Our top place for Collateralized P2P loans:
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You do not have cryptocurrency for collateral
Regular non-collateralized borrowing in the bitcoin space is significantly more difficult than getting a loan from a bank for example. Online identification or credit scoring is not standardized and the pure ownership of cryptocurrency incites a lot of thieves and scammers as collecting cryptocurrency is impossible, and collecting through the legal system is not well established yet. However that is not to say it cannot be done, just that it is harder. The 2 historic places where you could do this are P2P lending services Btcpop.co and Bitbond.com. Both services have evolved over the years to accommodate the extreme volatility of Bitcoin price. If the price skyrockets or crashes, repayments on Bitcoin loans tend to do the same.
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