Hello, this is Coinscript—your daily dose of knowledge about crypto and blockchain without jibberish.

In today’s episode:

• Crypto-backed mortgages explained!

Crypto-backed mortgages explained! 🤓

• You can now use your Bitcoin or Ethereum as collateral on your loan without selling your holdings.
  

• Crypto-backed mortgage allows you to retain your investments while accessing liquidity. Where do I sign up?!

What are crypto-backed mortgages?

Basically, it means that you set your crypto as collateral instead of cash or traditional assets.

Alright, but how does that work?

You transfer your crypto to the lender, who locks it up as your collateral and doesn’t touch it as long as you make timely purchases.

Fun fact: The first platform that offered Bitcoin-backed loans was first launched in 2012. The company was called BTCJam and it served over 16,000 loans in their first 4 years of operating.

Alright, where is the catch?

Well, there are two things that stand out and are not our favorite.

• Due to the high volatility of the crypto market, most of the lenders demand at least 150% or even 200% of the loan value as collateral.
  

• If the value of the assets falls below the required value, you will be asked to add additional crypto assets as collateral. Pro tip: don’t do it in the bear market 👀

Closing thoughts

Although crypto-backed loans could be very risky, they do have a lot of benefits like the fact that you never have to sell your investments.

What about you? Would you ever consider a crypto-backed loan?

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.