The thought of selling Bitcoin BTC/USD makes you feel squeamish? Strike, a cryptocurrency payments firm, has launched a new lending product that allows users to take out loans using the world’s largest cryptocurrency as collateral.
What Happened: The firm’s CEO, Jack Mallers, took to X, explaining how the new offering would work.
Like other credit-financing mechanisms, Bitcoin-backed loans involve temporarily pledging held BTC as secure collateral and receiving a cash loan, to be repaid with interest. The larger the loan, the more collateral is required.
For a 12-month loan, the interest rates begin at 12%, with a minimum borrowing amount of $75,000 and a maximum of $2 million. The loan-to-value ratio will be set at 50%, suggesting that the loans will be overcollateralized.
Strike cautioned that due to Bitcoin’s price volatility, the collateral value could diminish, limiting the lender’s ability to recover funds. In the event of a liquidation, the collateral could be sold to meet the loan-to-value ratio requirement.
Strive said the feature is available in select U.S. states with plans of expansion in the future.
See Also: Maxine Waters Plans Walkout From Crypto Hearing, Will Host ‘Shadow Hearing’ Opposing Trump Family Ventures: Report
Why It Matters: Strike was not the first mainstream trading app allowing users to borrow against their Bitcoin holdings. Cryptocurrency behemoth Coinbase Global Inc. COIN launched a similar offering earlier in January.
Additionally, decentralized lending protocol Aave AAVE/USD allows users to access liquidity by supplying their Bitcoin.
Price Action: At the time of writing, Bitcoin was exchanging hands at $96,666.47, up 2.42% in the last 24 hours, according to data from Benzinga Pro.
Photo Courtesy: PV productions On Shutterstock.com
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