I have discovered something that many people might already know. I have discovered that Coinbase offers crypto loans against multiple crypto assets. When they first started lending on their platform, it was limited to Bitcoin loans through Morpho. It appears I missed the memo when they expanded the collateral options.
Here are the collateral options offered for loans on Coinbase:
BTC
ETH
cbETH
SOL
JITOSOL
DOGE
ADA
LTC
XRP
I live in Texas, so there may be some geographic restrictions, meaning that perhaps there are other collateral types that aren't available to me. Even so, the collateral options offer fair diversification.
Of course, using Coinbase for crypto loans means that you would need your cryptos to be on their platform. They say "not your keys, not your crypto". But recent events with the Coinkite Coldcard show that even your keys aren't yours. Millions of dollars in Bitcoin were lost to a software bug in their cold wallets that allowed an attacker to guess keys and drain wallets.
The reality is that crypto that is stored in a wallet is just crypto stored in a wallet. If you need to do something with it, whether DeFi or some way of borrowing against it, you necessarily need to transfer it somewhere to borrow against it. Other than selling your crypto, any collateral use of your crypto risks DeFi hacks or third-party platform risk. Whereas DeFi might reimburse your for losses, a platform like Coinbase would have insurance to definitely reimburse your losses.
Some people have run afoul of Coinbase's security, getting locked out of their accounts. But these instances overlook the millions of users who use their platform without incident. I don't know what the people who get locked out of their accounts did, so I can't speak to that. However, I've had a Coinbase account for many years without any problems.
All of this is to say that whether by platform risk or DeFi risk, using your crypto as collateral for loans is not 100% risk free. Your best bet is to sell your crypto for cash, but then you have to deal with keeping records, taxes, and missing out on growth. On the other hand, you can't lose crypto after you sold it. You can take the money and run.
But, if you care about preserving capital for the long term and want access to it via loans, then I think Coinbase offers some good borrowing options.
Something I should point out is that not all collaterals offer the same loan interest rate or LTV (loan to value) ratio. Your best bets on Coinbase are BTC and ETH, currently at 4.9% interest and 86% LTV. The other collateral options have slightly more than 6% interest and 62% LTV. These are still workable. They aren't insane interest rates.
That's all I have for now. Just a quick informational post.
#cryptocurrency #coinbase #defi #crypto-loans #bitcoin #ethereum #blockchain #finance
