Japanese lender launches Bitcoin-backed loans of up to $6.2M

[Z-tight]

It may become very hard for this kind of loan to be repaid if the price of Bitcoin increases too quickly allowing the worth of the loan to also increases.

That's not true, even if the value of your collateral increases, it does not transcend to an increase in the repayment payable. What the debtor should be worried about is if the value of your collateral--which is BTC in this case--decreases, then you will be liquidated, if it dumps more than your collateral, or below the threshold set by your lender.

We've talked about BTC backed loans a couple of times and my idea about it still remains the same; i don't think it is a good idea for many obvious reasons. You could end up losing the BTC you were trying not to lose in the first place.

[uchegod-21]

I have a few concerns about this, which I am very certain will discourage me from patronising this Bitcoin-backed loan for any reason, no matter the situation I find myself in.

If the price of Bitcoin drops while my loan is still active, and consequently the value of my collateral falls below the lender's required amount, will I be required to send in more Bitcoin to meet the lender's requirements?

What if, unfortunately, the lender faces insolvency or the lender's system is hacked? Does it also mean that I will be at risk of losing my Bitcoin too?

For the period the Bitcoin will be held by the lender, I must miss the opportunity to sell for profits if, by coincidence, there is a sharp increase in price or if we enter a bull run.

No, a Bitcoin-backed loan is not attractive to me. I would rather use physical and more stable properties as collateral.

[TedMosby]

I wonder how good or bad this loan will be. Anyone with similar experience maybe can compare it directly? Still though, the number seems small compared to the number of hacked coins you heard on media every now and then.

Anyway, even if such loans are available in my are, I'm definitely not the market for that. I'm more comfortable getting enough funds on my own before doing anything risky.

I think it's a bit conservative, considering the LTV range is only 40–60%. Other platforms offer higher LTVs, which make them more beneficial and riskier for borrowers at the same time. For example, Binance offers a 78% LTV. Borrowers usually borrow as much as they can without even being aware of the risk of liquidation when their collateral's price goes down. So I think that LTV range is good for both the company and the people taking the loan.

I don't think people who have BTC are taking a Bitcoin backed loan for consumptive purposes. They offer a high borrowing cap of $6.2M, so this service is probably intended to target high net worth individuals or companies. So it's more likely for productive purposes, like business capital or to reinvest.

BTW, I wonder if their Bitcoin backed loan service is only available to Japanese customers or to a broader market as well.

[stompix]

I don't think people who have BTC are taking a Bitcoin backed loan for consumptive purposes. They offer a high borrowing cap of $6.2M, so this service is probably intended to target high net worth individuals or companies. So it's more likely for productive purposes, like business capital or to reinvest.

Companies and businesses will stay away from this, the contract terms are for 1 year, no business in Japan makes decisions for such a short time.
They would just go to a bank, access a 5-year loan at way lower rates than what they offer.

Also, a lot of people are mistaking what this service is addressed at, this is not some OFC deal :

Eligible users
Applicants must be between 18 and 70 years old and have a stable income (meeting our company's criteria). Part-time workers, freelancers, and self-employed individuals are also eligible.
*The actual interest rate will be determined by the credit check and will range from 3.5% to 7.0% per annum.

This is for individuals who want quick cash but don't want to sell their coins, nothing more.

[Z-tight]

If the price of Bitcoin drops while my loan is still active, and consequently the value of my collateral falls below the lender's required amount, will I be required to send in more Bitcoin to meet the lender's requirements?

Lol, of course you would, you can call it a 'margin call'. If your collateral drops significantly below the threshold set by your lender, you would be required to deposit additional funds within a specific time, failure to do so would result in liquidation.

What if, unfortunately, the lender faces insolvency or the lender's system is hacked? Does it also mean that I will be at risk of losing my Bitcoin too?

Ever heard of Celsius? There is always that risk, it depends on how the lender handles collateral, if they take on additional risks by liquidating it and investing it in something else. However, if they lose your coins, a long and frustrating legal process would follow.