Over a month ago, I found the Bitcoin collateral loan product by BlockFi and decided to give it a try. Collateral loans have spiked in popularity with the latest DeFi boom in crypto. Now, everyone seems to be trying to collateralize their crypto positions to take out a loan and gain instant liquidity.
There are pros and cons to every collateral loan product - whether you’re using a centralized or decentralized protocol. BlockFi offers a professional experience and feels more like using a new-age bank than using a decentralized protocol to collateralize crypto.
With my experience in decentralized loan protocols, I decided to give a centralized loan protocol a shot and see what the pros and cons are. After using BlockFi’s loan product, I can say that there are clear reasons for using either decentralized or centralized loans. For my personal portfolio, using a mix of the two types of loan products makes perfect sense. In this episode, I explain the BlockFi loan product, how it works and the pros and cons between CeFi and DeFi.
In This Episode:
- Why get a loan
- Liquidity Without Selling - participate in gains of your collateral + use liquidity to generate other returns
- Tax advantages
- Use Cases
- How the loan process works
- General process
- My experience
- Interest payments and paying off the loan with your collateral
- How Much BTC Do You Need?
- Minimum loan amount - $5,000 USD
- Recommended LTV - 50% (so if BTC is $10k/BTC and you want a $5k loan, you should have at least 1 BTC as collateral)
- Pros and cons for CeFi
- Customer service (professional)
- Safety net (margin call grace period)
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