Leave it to Wall Street to hypothecate anything. If it has cash flow attached the street will monetize it. Yet, like it or not cryptocurrency will begin to eat everything legacy. Frankly, it has been an ongoing process that begin many years ago.
Now what I’m about to discuss is hypothetical. People talk and of course I like to listen. The chatter I’m hearing involves the issuance of unsecured credit lines in relation to crypto currency holdings. Right now in the marketplace this does not exist.
Many of the loans that are issued at this time involve pledging (pawn brokering) crypto holdings for dollars. There are many lenders out there at this time. However, many of the loans do involve margin risk. Truthfully, they are more like stock margin loans.
I don’t like these loans. Truth be told getting a margin call at 5:30 am is every traders nightmare.
Getting traded out of a crypto loan is even worse. But these products exist nonetheless.
Ultimately the crypto market will begin to mature and stabilize. Many of these market swings may also begin to skew as long term HODLERS stand their ground. In essence the legacy players will realize that there is gold in these crypto hills.
Which leads to the crypto market eating the entire legacy system. Now, hypothetically speaking, we may see integration of unsecured stable coin loans. Stable coins are tethered to fiat currency. So the volatility risks are null baring any solvency issues.
Now these credit lines will be available just like fiat loans. Of course credit quality will be a factor. However, I believe there may be a gamification aspect i.e. account age, number of trades for loan approval. They may also be non recourse.
These crypto lines of credit may also be packaged and sold in tranches. And just like any other Wall Street product billions can be made. Interest rates can be market rates or based on a gamification algorithm. Customer loyalty= lower interest rate. Frankly, the FICO score is on it’s way out.
Now how does this all play out? Well, there will have to be a particular player to “experiment” with the idea. Once this track record is solidified more people will copy the formula. The logistics are not difficult to implement.
Many financial institutions have been experimenting with blockchain tech over the last few years. Some have made a mess of things by not doing what they do best: lend money. Instead of focusing on the business of blockchain they have tried inventing what the market place does not want; another Sh$t token.
So we might see this product come into existence. The question will be how the market place reacts? Will people gravitate towards taking out liquidity loans? Or will it be a complete bust?
I can tell you that people in this economy need liquidity. Digital assets are not going away. In fact, the market place is growing at an accelerated rate. It’s my assessment that whoever decides to become first in the crypto unsecured loan market will become very wealthy.
Posted Using LeoFinance Beta