Loans and debt have become words associated with Bitcoin. This is similar to traditional finance where debt and debt remain a large part of the ecosystem. However, there is no intersection of the three. This usually stems from traditional financial distrust of bitcoin. Digital assets that are generally unregulated do not provide the support tradfi needs. That is until now.
Bitcoin Supported Debt In Tradfi
Investment bank Goldman Sachs has declare the introduction of Bitcoin -backed loans. In what was a first for a major U.S. bank, Goldman Sachs has expanded its crypto offerings to include these bitcoin -backed loans. This is the first secured loan facility that will give you cash backed by BTC.
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Typically, banks have avoided cryptocurrency because of its unstable and unregulated nature. However, various institutions have provided services that revolve around cryptos such as asset and wealth management, trading, and investing. All of them stay away from cash loans that use bitcoin as collateral.
A move like this will see not only Wall Street embrace cryptocurrency faster but other fractions of traditional finance will start moving in this direction.
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Goldman Sachs has no doubt evolved in its view of bitcoin over time. Less than two years ago, banks did not believe that cryptocurrency was an asset class. Since then, it has not only recognized it as an asset class but has offered clients a way to trade cryptocurrency. It also has a crypto research team that publishes reports on the crypto market. For several months, the report was generally bullish on digital assets such as Bitcoin and Ethereum.
Crypto Guarantee
Although this is the first time for a major bank to accept bitcoin as collateral for loans, it is not a new concept. The rise of the decentralized financial space (DeFi) has seen users able to borrow against crypto ownership for a long time. There is a special DeFi protocol for this in place.
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In this regard, traditional finance is holding a DeFi that does not require documents for individuals to secure loans. With a deal like the one offered by Goldman Sachs, it could help bridge the gap between traditional finance and decentralization.
Bitcoin was trading at $ 38,927 at the time of this writing, down 2.64% in the last 24 hours.
Featured image from Bitcoin Lending, chart from TradingView.com
