A key factor holding back cryptocurrency from gaining a stronger foothold with investors is its lack of utility.
The more purposes you can create for them to be easily used by functioning markets, the more they should grow in popularity.
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“At the time (2014-15) Bitcoin’s market cap was about $10 billion,” Mr. Kelly said. “That was $60 billion that wasn’t moving, Now the market cap is 30 times that.”
The pair began thinking of what they could build that would encourage people to actually use Bitcoin. A bit of a tough act, given so many were afraid of losing future gains by cashing in too early.
What if they could provide that value while allowing Bitcoin users to hold onto it? In 2016 Mr. Bansal and Mr. Kelly spoke with people with extensive crypto holdings and asked them about the attractiveness of different investment vehicles.
“Liquidity, derivatives, and fixed income were all attractive,” Mr. Bansal. “Those financial instruments exist for any other asset class.”
The process begins by requesting an account and identifying your state of residence (Unchained Capital’s services are currently available in 30 states). After filling out a KYC questionnaire, applicants use their existing wallet to send their collateral to the loan’s escrow address. Once the collateral is deposited the funds are wired. The loans are serviced with monthly interest-only payments, with the principal due at final payment.
Because the loans are heavily collateralized, Unchained Capital’s scoring methods don’t have to be as extensive as other borrowing options, Mr. Bansal said. They analyze the applicant’s general financial health and ensure they can afford the interest payments.
Unchained Capital takes several steps to guard against Bitcoin’s wild price fluctuations, Mr. Kelly said. If the collateral value drops by 25 per cent they will request additional collateral or principal payment. Should it drop by 45 per cent they reserve the right to repossess the collateral and sell it to recover the principal and interest.
While the pace at which Bitcoin reaches each new height is faster than some expected, its long-term health doesn’t rely solely on speculators, Mr. Kelly said. Citing its libertarian roots, he said a strong core belief in cryptocurrency for what it represents – a different societal approach to units of exchange.
“One has to hold those contradictions in one’s mind,” Mr. Bansal added. “Long-term, Bitcoin is probably one of the best investments to make in this generation. But it is also in a bubble, I don’t see why that can’t also be true.
“Can it fall from here to $2,000? Easily.”
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