Crypto Lending Explained: Best Platforms, Common Mistakes to Avoid, Where to Invest the Loan.
Since the introduction of smart contracts and decentralized finance, many crypto platforms have been developed. Crypto users have also extended their use cases for cryptocurrencies, which led to the introduction of crypto lending as an investment. The idea is to utilize crypto holdings to earn interest or through the inherent increase in value of the digital asset itself.
As a result of decentralized finance, crypto staking and crypto lending sprung up and expanded the earning possibilities of any crypto holder. However, cryptocurrencies are typically highly volatile digital assets that are classified as risky. Therefore, introducing lending crypto has exposed several crypto holders to risks they aren’t prepared for. In some instances, these have led to the loss of funds and lawsuits.
In order to avoid unnecessary losses when you borrow crypto, you first need to choose the right platform. Crypto enthusiasts are encouraged to do their own research on the platforms and determine which crypto lending platforms meet their requirements. The blockchain and cryptocurrency market is a highly volatile industry where scams, rug pulls, and legitimate products co-exist.
Several projects often start out excellent, but some fail to meet client needs along the way. Therefore users are encouraged to keep up with trends and use the recently endorsed platforms that prioritize client services.
A suitable crypto loan platform shouldn’t have a rigorous KYC process. Also, platforms that offer ridiculously high yields are red flags since their business models often involve reinvesting clients’ collateral, which is highly risky. To avoid common crypto loan mistakes and stay profitable, it is crucial to find the best platform, avoid spending mistakes and utilize your crypto loans to earn more.
Determining the best crypto lending platform
Some well-known crypto projects have caused massive losses to people on their platforms. Recently, the infamous Terra Luna collapsed, losing nearly 99% of its value and bankrupting several holders. To borrow crypto must perform extensive research before investing in a particular platform or project.
As for crypto loans, there are established platforms with impressive track records in providing client-friendly crypto loans. In order to determine the best platform, one must consider a variety of features such as security, history of the platforms, interest rates, business model, and approval rates by other platforms.
Below are some of the popular cryptocurrency borrowing and lending platforms.
The CoinRabbit platform is one of the most famous and credible crypto loan platforms in the current crypto loan rankings. The Centralized finance platform offers crypto loans in three simple steps and allows for a variety of crypto collaterals. The platform accepts over 140+ cryptocurrencies as collateral, according to the current data. Here you can check the detailed process of getting a crypto loan on the example of this platform: https://www.coinspeaker.com/get-crypto-loan/.
Unlike other scandalous platforms that lend crypto, the CoinRabbit platform does not use deposited collateral to invest in third-party firms. Instead, their business model depends on interests earned from crypto loans they issue. The business model ensures clients’ collateral tokens are safe and stored in cold wallets that are safeguarded by renowned third-party companies like Guarda and ChangeNow.
The CoinRabbit crypto lending platform offers a monthly APR of 1.2%. They also provide a lucrative APY of 8%, which is significant. The platform is renowned for its reliability, as well as faster loan processing, with no KYC check required.
Although Aave is not a typical crypto loan platform, it is mainly known as a crypto staking platform. Since it offers earning opportunities for crypto users, it qualifies in this list as one of the viable options for crypto-backed loans.
Aave’s liquidity protocol allows people to earn interest, borrow assets and build applications within its ecosystem. Just like its counterpart, CoinRabbit, the Aave platform also offers no fixed term loans. The platform provides flash loans with no KYC as well; however, it isn’t user-friendly and can pose challenges for newbies.
Nexo provides cryptocurrency loans to users. The process is fast and straightforward, with reasonable rates. The platform also offers fiat currencies in exchange for crypto collaterals. The platform has a native token that allows users to earn a reward. It is, therefore, disadvantageous for people who don’t own the native token.
KXCO is a leading firm in Southeast Asia. Dating back to the Crypto-currency market of 2012. In traditional markets, KXCO has been operating for 40+ years, under the former – and still used – name Knightsbridge.
Since the start of KXCO in Crypto, the firm has successfully launched a Blockchain with new advancements in regulatory fields, appealing to government policies and banks globally, revolutionizing the abilities of Blockchains as a whole.
Common crypto loan mistakes and how to navigate them.
Most crypto loan users make mistakes when handling loans from crypto lending. The crypto sentiments often vary during the bear and bull markets. However, it is vital to stick to the fundamentals when handling crypto loans in order to avoid losses.
It is typical for beginners to make mistakes; however, emphasis should be put on learning ways to navigate these common mistakes and maximize profits when lending crypto.
Common cryptocurrency loan mistakes include:
Failing to buy the dip.
Not performing proper market research.
Ignoring short-term opportunities that can obtain day traders.
Additionally, loan users should monitor loan statuses to avoid liquidation. Finally, crypto users must take cryptocurrency-backed loans instead of selling their digital assets to access funds.
How to increase ROI with crypto-backed loans
In order to make the most out of a crypto loan, one must plan their investment strategy beforehand. As addressed earlier, performing adequate market research and identifying platforms that meet the requirements is crucial. Additionally, for maximum return on investment (ROI), it’s necessary to be on the lookout for new tokens with high-profit potential.
By avoiding the mistakes above and crafting a solid investment strategy, it is possible to increase ROI and make profits using crypto loans.
The crypto borrowing and lending industry have grown significantly as more crypto enthusiasts realize the freedom and ease of using crypto loans. Unlike traditional banks, where several factors such as credit scores and rigorous KYC processes are required, crypto loans provide a simple, fast, and straightforward lending process with minimal regulations. Credible platforms offer loans with unlimited loan terms, no KYC processes, and reasonable APRs. However, for crypto-backed loans, users need to avoid the common mistakes discussed above.