How are altcoins collateral

[TwinWinNerD]

If someone believes the LTC/BTC exchange rate will increase then they would take that loan.

No, what im saying is that if you already have the amount of money you need in altcoins what would be the point of asking for a loan

It's very simple...they are asking for a loan despite the fact that they already have funds available.
They just don't want to risk their own money but hope to turn the loan money into a profit.

That makes no sense because they are giving a collateral thats worth 120% of the loan wich is THEIR money so they are actually risking more money.

Have you ever heard of leverage?

Lets assume you have 10000 LTC. and you think in the next 4 weeks LTC will go up drastically. You can now borrow 50 BTC and give the 10000 LTC as collateral. Now you buy more LTC with that BTC and now have nearly 20000 LTC long position. So instead of selling LTC and buying LTC ( ...) you can go the collateral loan route.

That is also how financial markets work basically, but due to repercussion, they can offer a lower collateral and thus a higher leverage.

[1715081456]

1715081456

[The Sceptical Chymist]

I've never really understood that either. Using money to get a loan of other money seems pointless. I think most people who take out loans here do so just for the feedback though so that's one reason. Using your account as collateral seems like a better option though sometimes people need the accounts to actually earn the money back.
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I agree with that, except a lot of folks see bitcoin and other coins as an investment rather than a currency ie not money.

[XinXan]

If someone believes the LTC/BTC exchange rate will increase then they would take that loan.

No, what im saying is that if you already have the amount of money you need in altcoins what would be the point of asking for a loan

It's very simple...they are asking for a loan despite the fact that they already have funds available.
They just don't want to risk their own money but hope to turn the loan money into a profit.

That makes no sense because they are giving a collateral thats worth 120% of the loan wich is THEIR money so they are actually risking more money.

Have you ever heard of leverage?

Lets assume you have 10000 LTC. and you think in the next 4 weeks LTC will go up drastically. You can now borrow 50 BTC and give the 10000 LTC as collateral. Now you buy more LTC with that BTC and now have nearly 20000 LTC long position. So instead of selling LTC and buying LTC ( ...) you can go the collateral loan route.

That is also how financial markets work basically, but due to repercussion, they can offer a lower collateral and thus a higher leverage.

You would have to pay back, you know that right? You have 20.000 ltc but you have to give those 50 btc back, ltc would have to go drastically up as you said but its impossible to predict that. Anyways 99% of loans here are for values worth < 1 BTC so they are obviously not for that

[pawel7777]

You would have to pay back, you know that right? You have 20.000 ltc but you have to give those 50 btc back, ltc would have to go drastically up as you said but its impossible to predict that. Anyways 99% of loans here are for values worth < 1 BTC so they are obviously not for that

Why 'drastically'? Any up movement will give you profit (depends on the loan cost and tx fees). And why do you think you can't do this with <1 BTC loan?

[XinXan]

You would have to pay back, you know that right? You have 20.000 ltc but you have to give those 50 btc back, ltc would have to go drastically up as you said but its impossible to predict that. Anyways 99% of loans here are for values worth < 1 BTC so they are obviously not for that

Why 'drastically'? Any up movement will give you profit (depends on the loan cost and tx fees). And why do you think you can't do this with <1 BTC loan?

Well basically as you said fees and loan interest would kill your profit. Like lets say 1 BTC = 100$ and 1 LTC = 1$
You have 120 LTC and you take a loan of 1 BTC to buy 100 ltc. you wait for the price to go up and you sell them lets say the price went to 1.2$ per LTC so you would have 120$ or 1.2 BTC (excluding any fees) so you basically won 20$ for that loan, now you have to payback the loan wich will have an interest of 5-10% maybe more in some cases. If it is 10% you have to pay back 1.1 BTC leaving you with 10$ profit (excluding fees) wich is a profit but too small considering all the things you have to do.

[pawel7777]

You would have to pay back, you know that right? You have 20.000 ltc but you have to give those 50 btc back, ltc would have to go drastically up as you said but its impossible to predict that. Anyways 99% of loans here are for values worth < 1 BTC so they are obviously not for that

Why 'drastically'? Any up movement will give you profit (depends on the loan cost and tx fees). And why do you think you can't do this with <1 BTC loan?

Well basically as you said fees and loan interest would kill your profit. Like lets say 1 BTC = 100$ and 1 LTC = 1$
You have 120 LTC and you take a loan of 1 BTC to buy 100 ltc. you wait for the price to go up and you sell them lets say the price went to 1.2$ per LTC so you would have 120$ or 1.2 BTC (excluding any fees) so you basically won 20$ for that loan, now you have to payback the loan wich will have an interest of 5-10% maybe more in some cases. If it is 10% you have to pay back 1.1 BTC leaving you with 10$ profit (excluding fees) wich is a profit but too small considering all the things you have to do.

$10 is more than zero. Sure, the amount is small, but the whole investment is not big either. So you should focus on % rather than amount.
$10 is ~8.3% of your original $120 worth LTC holding. If we're talking about short term, say 1-2 weeks, that's very good result.

And if the period is short and the collateral is solid, you could easily find a loan cheaper than 10%. Those 'all the things you have to do' probably won't take more than 1 hour of your time combined.

Again, if you have X amount of LTC and absolutely no other funds available, and you know for sure that LTC will go up very soon, what do you do? Nothing?

[XinXan]

You would have to pay back, you know that right? You have 20.000 ltc but you have to give those 50 btc back, ltc would have to go drastically up as you said but its impossible to predict that. Anyways 99% of loans here are for values worth < 1 BTC so they are obviously not for that

Why 'drastically'? Any up movement will give you profit (depends on the loan cost and tx fees). And why do you think you can't do this with <1 BTC loan?

Well basically as you said fees and loan interest would kill your profit. Like lets say 1 BTC = 100$ and 1 LTC = 1$
You have 120 LTC and you take a loan of 1 BTC to buy 100 ltc. you wait for the price to go up and you sell them lets say the price went to 1.2$ per LTC so you would have 120$ or 1.2 BTC (excluding any fees) so you basically won 20$ for that loan, now you have to payback the loan wich will have an interest of 5-10% maybe more in some cases. If it is 10% you have to pay back 1.1 BTC leaving you with 10$ profit (excluding fees) wich is a profit but too small considering all the things you have to do.

$10 is more than zero. Sure, the amount is small, but the whole investment is not big either. So you should focus on % rather than amount.
$10 is ~8.3% of your original $120 worth LTC holding. If we're talking about short term, say 1-2 weeks, that's very good result.

And if the period is short and the collateral is solid, you could easily find a loan cheaper than 10%. Those 'all the things you have to do' probably won't take more than 1 hour of your time combined.

Again, if you have X amount of LTC and absolutely no other funds available, and you know for sure that LTC will go up very soon, what do you do? Nothing?

Im not saying its a bad idea overall, but its impossible to know if its going up that much because in my example ltc went from 1$ to 1.2$ wich is a substantial increase, if you are that good to predict that kind of stuff you dont need to borrow 1 btc, you can just do it with your money and make the earnings by yourself.

[pawel7777]

Im not saying its a bad idea overall, but its impossible to know if its going up that much because in my example ltc went from 1$ to 1.2$ wich is a substantial increase, if you are that good to predict that kind of stuff you dont need to borrow 1 btc, you can just do it with your money and make the earnings by yourself.

You're right. I reckon a lot of such small loans are not really taken to bet on exchange rate, but simply to earn a trust score.

[Gyfts]

The point of providing the collateral is to put a guarantee on the loan. Many might want to keep that Litecoin, so instead of directly trading it, they can receive it back by putting it as collateral. This way a person can use the value of the collateral without technically giving it up. This is under the circumstance the loan is paid back of course. Other reasons may include the exchange rate and fees associated with transferring over with crypto's.

[MAsterV]

I think the altcoins collaterals are only accepted if the lender believes the value is equal or higher than the loaning amount.. Or is expecting that..

It's great because if the person tries to run with the bitcoins, the lender can sell the altcoins to get their worth back..

[Amph]

i never understood those stupid loans and collateral, i mean what's the point of it? you can just use your collateral for your own loan, and resolve your problem

just do it with your friend or whoever, no wonder there are plenty of scammers in that section, they are there, only for that

[XinXan]

i never understood those stupid loans and collateral, i mean what's the point of it? you can just use your collateral for your own load, and resolve your problem

just do it with your friend or whoever, no wonder there are plenty of scammers in that section, they are there, only for that

I understand some kind of collaterals like in real life you put your car as a collateral because you need some money and you want to make an investment of some sort but at the same time you dont want to lose your car and thats why you dont sell it directly but use it as a collateral, but with altcoins? what are you afraid of? loosing your altcoins?

[Sarthak]

I think its better to exchange the altcoins and get some bitcoins instead of putting altcoin as collateral (120% of value of the loan taken). Plus Why pay interest when you can exchange the altcoins and get your own money to do the work? There are people who do interest free loans when you have a valid altcoin collateral but exchanging the altcoins and using your money  is always a good choice