By Landon Manning
With all the attention bitcoin has received for its massive price increases in recent times, the asset is growing in various financial use cases. For example, reports show that he has taken the collateral world by storm.
According to a report Created through a collaboration between Arcane Research and Bitstamp, the use of bitcoin as collateral in loans had nearly doubled from 2019 to Q4 2020, with some 420,000 bitcoins used for that purpose in 2020 alone. Claiming that bitcoin is “the most portable asset the world has ever seen,” the study showed that a wide variety of loan types have all contributed to the surge in bitcoin traffic in recent years. month.
The study goes on to indicate that it is not only the rise in bitcoin prices that explains this growth in the collateral market, but rather several important foundations that form the very foundation of Bitcoin’s blockchain technology. With no possible counterparty or credit risk in Bitcoin’s trustless model, Arcane Research and Bitstamp noted that “Bitcoin can be transferred around the world, instantly, almost for free, at any time of the day and no. “any day of the year, and with finality. No other asset can match these properties today, making bitcoin the perfect collateral asset for the future.”
This trend in loan guarantees has not gone unnoticed around the world. For example, on February 28, 2021, before these two companies released their report, the South China Morning Post published his analysis of this phenomenon in Southeast Asia. With the US dollar experiencing price fluctuations in the international currency market, a number of financial technology and investment companies in Hong Kong and Singapore have offered premium offers on the use of bitcoin as collateral for loans in USD, depending on To post. As Richard Byrworth, CEO of Singapore-based Digitex, told the newspaper: “If we see the dollar weakening against bitcoin, this might be a better way to spend fiat money today than ‘at a future date.
Yet in the grand scheme of the international trade in loans and guarantees, bitcoin has so far taken only a tiny slice of the pie. With some $ 20 trillion locked in the collateral market, the $ 30 billion that Arcane Research and Bitstamp estimate bitcoin occupies is barely a dent in the total. And yet, they note, that number has increased astronomically, and the fundamentals are there for it to continue to do so. The researchers conclude that they expect bitcoin to climb to $ 1 trillion in the collateral market alone, and that this could happen sooner than many people think.
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