Loans are an important part of the digital asset trading ecosystem. Margin trading, or trading on leverage, is a popular way to earn money without risking your own funds. However, it is only beneficial if you win, and you never know if you win. It’s a dangerous strategy, and not just because of the inherent risks of playing with borrowed money.
Margin accounts, or collateral accounts are the usual way to organize such strategies in trading. Most exchanges – both crypto and regular – offer users that are better-off to create a special account that enables them to borrow. The running theme of such deals is that the conditions are good on paper but have a dark side.
Namely, the amount of money you’re typically allowed to take can be incredibly generous. The leverage ratios of 1:100, 1:1000, and even more are pretty common. It means you can borrow $100 or $1000 for every $1 you have on your balance. If you fail to repay this amount, however, the consequences can be disastrous.
CoinDepo, by comparison, can offer crypto loans, including stablecoin loans, with much less risk and more favorable terms.
Collateral Accounts Explained
Margin trading isn’t available for just anyone. The exchanges usually approve collateral accounts only for users that have something substantial in reserve – the exact amount varies, but it’s usually at least several thousand. Essentially, they want to be sure that, in case of a failure, you have something to lose and you won’t just bail.
These accounts are organized in such a way that having just the collateral to back you up is not enough. You must have something additional stored away in case your scheme fails. The system will use the funds from your account to partially cover your debt, but you may not have enough.
The broker won’t just demand the money when the time is due. More often than not, they’ll do it way sooner. If you lose a certain amount of value in your account – both from borrowed and personal funds – a margin call can be issued. It basically calls upon you to restore the equity to the necessary, preset level.
If that happens, you’ve likely lost a good deal of that borrowed money already. They won’t allow you to trade anymore until you’ve filled the gap. So, at the end of the day, the crazy 1:1000 leverage is only limited to a small amount at the top. If you start losing, they’ll stop you from losing more. If you win, you’ll have to repay a portion of your winnings as debt.
It’s all very inconvenient. If the margin call is issued, you can just liquidate the position you’ve opened with those borrowed funds. Together with the collateral, and perhaps some additional funds, you will likely be able to repay the debt. It’s usually better to repay under such conditions than to bail.
CoinDepo Loan Services Explained
CoinDepo doesn’t offer anything of the sort, but does offer an Instant Credit Line that can be used for trading. CoinDepo is a digital asset financial services provider that offers crypto loan without collateral and interest on stored cryptocurrencies and stablecoins. Basically, you can entrust a certain amount of coins to them, and they’ll increase that amount over time just because you entrusted it to them.
It comes in handy with the other big feature of this system, the borrowing part. You can borrow cryptocurrencies or stablecoins from them. The promised amount will likely not be as huge as what brokers offer you for trading. However, as you’ve seen just now, those promised amounts are very often limited in potential and actual worth.
The loan amount that you can receive from CoinDepo is limited to 50% of the value of your CoinDepo crypto portfolio in CoinDepo Compound Interest Accounts, which is the collateral for the Credit Line. However, at the end of the day, it’s more sustainable, and you can make this amount last much longer, since the interest for using the loan will always be less than the interest you earn on your crypto portfolio in CoinDepo.
How to Borrow from CoinDepo
Borrowing from CoinDepo is a lot simpler, more straightforward, and mutually beneficial. The best way to get a loan is through their Instant Credit Line which requires no collateral account. You receive funds immediately with a very soft borrowing policy. It can be summed up in a couple of key takeaways:
- You can only borrow funds from CoinDepo if you hold crypto or stablecoins in CoinDepo Compound Interest Accounts. It’s similar to a collateral account because these funds will act as collateral for the borrowed funds.
- You can borrow up to 50% of your CoinDepo balance. Your crypto portfolio in CoinDepo will serve as collateral for a loan, but this is not a problem.
- It’s not a problem because these funds won’t just lie idly. They’ll accumulate compound interest over time just like any other funds in CoinDepo at any time. It’s a good bonus, but it’s also immensely practical. See, the company charges a certain interest rate on the borrowed funds, but the amount of interest paid for using the loan will always be less than the amount of interest you get on collateral.
In contrast to the usual system of margin trading, where brokers put innumerable constraints to ensure they get their money back, the mechanism at CoinDepo is more lenient. It actually benefits both the company and you to have this arrangement. They get to play with your money, while you get to spend their money.
It’s co-beneficial. Since the collateral is always twice your credit limit, you can never get into too much debt. For this reason, borrowing cryptocurrency or stablecoins from CoinDepo comes with much less risk. It’s overall a respectable, effective service.
The actual process of borrowing money from CoinDepo is rather simple. You only need to follow a few simple guidelines:
- Register a CoinDepo Account.
- Deposit some crypto or stablecoins into the platform.
- Borrow your coins – remember that you can only borrow half of what you yourself deposited.
- Withdraw the borrowed funds to one of the external wallets.
- Transfer funds to a crypto exchange for trading or use funds for other purposes.
- Once you realize your plans, deposit the funds back to CoinDepo and repay the loan.
There are a lot of benefits to trading on borrowed funds. The biggest upside is that you don’t risk your own digital assets, even considering that you will probably have enough funds to not rely on other people’s money. With CoinDepo, you can add more to your portfolio with basically no drawbacks.