COINBASE for Crypto has come

[vimothy]

but you literally never have to pay it back, if the value of your collateral stays above the value of the loan?

 

[Clinamenic]

but you literally never have to pay it back, if it stays above the value of the loan?

Yeah, you would never need to pay it back. The collateral would just be locked up.

 

[vimothy]

who's making these insane loans? what are you borrowing?

 

[Clinamenic]

who's making these insane loans? what are you borrowing?

I use and invest in Nexo, which takes a cut of the interest and repays the rest to depositors, who are at less of a risk considering the loans are overcollateralized.

 

[Clinamenic]

You borrow stablecoins, mainly, but then can instantly exchange them for other assets.

 

[vimothy]

I use and invest in Nexo, which takes a cut of the interest and repays the rest to depositors, who are at less of a risk considering the loans are overcollateralized.

so it's just a line of credit, like an overdraft, secured against your bitcoin?

 

[Clinamenic]

so it's just a line of credit, like an overdraft, secured against your bitcoin?

Yeah, and in the case of Nexo, the interest you pay depends on your membership tier. If you hold a certain percentage of your portfolio in NEXO tokens, you pay less interest on your loans and you earn more on your deposits. You can also earn interest on your deposited NEXO, which has a 12% APY if you lock it up in year-long fixed deposits, and less of an APY if you don't lock it up.

 

[Clinamenic]

you pay less interest on your loans and you earn more on your deposits.

But still with enough of a margin to allow Nexo to profit as a platform.

 

[Clinamenic]

so it's just a line of credit, like an overdraft, secured against your bitcoin?

Although, as I understand it, overdraft is impossible, unless the collateral depreciates so suddenly that the loan isn't liquidated in time to prevent the outstanding amount from exceeding the collateral value. But even then, the liquidation should be instantaneous, so even that might not be possible.

 

[vimothy]

interesting thanks

what happens if the value of your bitcoin falls below what you owe?

 

[vimothy]

But still with enough of a margin to allow Nexo to profit as a platform.

so nexo dont pay you with their own tokens?

 

[Clinamenic]

Yeah, and in the case of Nexo, the interest you pay depends on your membership tier. If you hold a certain percentage of your portfolio in NEXO tokens, you pay less interest on your loans and you earn more on your deposits. You can also earn interest on your deposited NEXO, which has a 12% APY if you lock it up in year-long fixed deposits, and less of an APY if you don't lock it up.

And whats good about Nexo is that there isn't minimum requirement in absolute terms. If your portfolio is worth $100, you just need a minimum of $10 worth of NEXO to be a platinum member.

 

[vimothy]

Although, as I understand it, overdraft is impossible, unless the collateral depreciates so suddenly that the loan isn't liquidated in time to prevent the outstanding amount from exceeding the collateral value. But even then, the liquidation should be instantaneous, so even that might not be possible.

it's definitely not impossible

 

[Clinamenic]

so nexo dont pay you with their own tokens?

This is an option, to have interest on all of your deposited assets paid in NEXO, but not in the US. I'd expect this will become an option for us once Nexo meets certain regulatory criteria.

 

[vimothy]

i mean, what are they giving you?

 

[Clinamenic]

interesting thanks

what happens if the value of your bitcoin falls below what you owe?

The automatic liquidations are designed to prevent this, but perhaps if there is enough network traffic, or a bug of some kind, and the market is especially volatile, it could happen. It would need to be severe, though, because most of the assets only allow for a loan that is under half the value of the collateral.

 

[Clinamenic]

i mean, what are they giving you?

Really good interest rates on my deposits, paid out in the form of the asset deposited.

 

[Clinamenic]

The automatic liquidations are designed to prevent this, but perhaps if there is enough network traffic, or a bug of some kind, and the market is especially volatile, it could happen. It would need to be severe, though, because most of the assets only allow for a loan that is under half the value of the collateral.

Like the price of BTC would need to fall by 60% in a matter of moments for this automatic liquidation process to potentially fail. Of course, there is always the risk of bugs.

 

[vimothy]

an obvious failure case is if selling following margin calls causes the price to fall, eg as with portfolio insurance crash

 

[vimothy]

Really good interest rates on my deposits, paid out in the form of the asset deposited.

no I mean literally