Reasons why you should borrow a particular cryptocurrency from crypto loan is a must have skill to avoid liquidation of crypto loan collateral.
Gone are the days where you pay a high interest rate to commercial banks to secure a loan.
With the use of your cryptocurrency, you can easily secure a crypto loan in a very fast manner.
Before you secure a loan from crypto, you must arm yourself with a lot of knowledge on how to go about it.
This includes knowledge like the type of crypto to borrow to how to avoid high interest rate from crypto loan.
In this guide, you will learn of the reasons why you should borrow stable coins from crypto loan.
Top 10 Best Reasons To Borrow Stable Coins From Crypto Loan
1) Stable Coins Are Not Affected By Fundamentals
When you want to choose a cryptocurrency that you want to borrow, let it be a crypto that is not easily affected by fundamentals.
Fundamentals here means government policies, news and crypto influencers social comments.
Remember what happened to the price of bitcoin when Elon Musk twitted that payments will no longer be accepted through bitcoin.
This single social message led to the fall of bitcoin price.
This is why you should avoid borrowing any cryptocurrency for loan apart from stable coins like BUSD or USDT.
This is because stable coins are never affected by fundamentals.
Stable coins are pegged to things like commodities or the fiat of other countries.
For example, the BUSD and USDT is pegged to USD.
This means that stable coins like these cannot fall below $1.
The other thing you should know is that they cannot also rise above $1.
When you borrow stable coins for crypto loan, you have peace of mind because its valuation will not be affected by fundamentals.
2) Stable Coin Is Not Affected By Pump And Dump Schemes
Encountering a pump and dump scheme can be a very exciting moment during trading it is in your favour.
It becomes painful if it is not in your favour.
This is because the price of the cryptocurrency moves in a very steep manner in a matter of seconds or minuites.
When this happens in a crypto loan, it leads to the repayment of a higher price in crypto as compared to the price when you borrowed.
Example is if you borrowed a crypto when the price was $1 to pay an interest 0f 1%.
The total amount to pay when the interest is due should be $1.01 when the loan is due.
If the price of the coin spikes to $5 per coin, you will be paying $5.05 when the loan is due.
Can you imagine such increase.
This has led a lot of crypto loan users to run into some high level of losses just because they failed in borrowing a stable coin.
That is why it is good to borrow a stable coin.
When you borrow a stable coin, you pay the same amount you should pay.
This is because the price of stable coins do not move above $1.
3) Borrowing Stable Coins Reduce Risk Of Crypto Loan
Borrowing a cryptocurrency comes with some risk attached to it.
This risk ranges from price fluctuations of the borrowed crypto to the ability to pay back the borrowed crypto with interest when due.
If you are borrowing a stable coin, you just have peace of ming as the amount to repay does not change in future.
If you are using a cryptocurrency that is not a stable coin, the risk gets higher.
This is because you may run into a situation in which the price of the borrowed crypto spikes in value.
When this happens, you pay more than what you borrowed.
This becomes a problem when you want to pay back the crypto that you borrowed.
But when you are borrowing a stable coin, the risk is greatly reduced.
This is as a result of price stability of stable coins.
Stable coins are always stable in the bearish season.
They are also very stable in the bullish seasons.
This is why it is good to borrow stable coins for crypto loans because it reduces the risks encountered.
4) Borrowed Amount Repayment Quantity Does Not Change Overtime
One of the best reasons to borrow stable coins from crypto loan is that repayment quantity does not change overtime.
When you borrow other cryptocurrency other than stable coins, you may pay higher figure when the loan is due.
This is due to the price increase that the crypto has gained overtime.
Take for example if the price of a crypto was at $10 when you borrowed and on the day of payback is it at $30.
This means that you have to pay three times more than what you collected.
This will lead to a spike in your LTV value.
You will also run into early liquidation if you do not add more crypto to your crypto loan collateral.
When you borrow a stable coin, you are free from the change of crypto price when you want to repay the borrowed crypto.
5) Stable Coins Have High Liquidity
When it comes to trading pairs in the crypto market, stable coins have a large liquidity.
This makes it a good decision to borrow stable coins from crypto loans.
This will make it easy for you to use the borrowed crypto for anything you want to use it for.
You can use the borrowed crypto to trade other crypto pairs without the need to convert the borrowed crypto.
This is because majority of cryptocurrencies have a trading pair with stable coins like USDT or BUSD.
These pairs come with a large liquidity that makes it easy for you to use your borrowed crypto.
6) Stable Coins Can Be Used To Easily Buy Other Crypto
Buying other cryptocurrencies is very easy when you have a stable coin.
This is why it is very wise to borrow stable coins from cryptocurrency loan.
Apart from bitcoin, the ease in buying other cryptocurrencies with the use of another cryptocurrency is usually hard.
Even if you see it, the liquidity might be smaller than what you need and this may lead you to buying at a bad price.
With stable coins, such problems are not commonly seen as they have a large adoption and can be used to buy other crypto easily.
This solves the problem of buying newly listed cheap cryptocurrencies.
This is because majority of newly listed coins especially crypto under a dollar always have low number of trading pairs.
The dominant pair that always exist to buy or sell new crypto are mostly stable coin pairs.
7) Stable Coins Are Generally Accepted In Crypto Exchanges
When it comes to the cryptocurrency with massive adoption, the pointer picks stable coins.
Due to the wide trading pairs in which stable coins can be used to trade, it is highly accepted across all crypto exchanges.
This level of adoption makes stable coins a good crypto to borrow from crypto loan.
Borrowing stable coins from a crypto exchange is easy as compared to other crypto coins.
This is because some cryptocurrencies are not available in some crypto exchanges.
With stable coins, it is easy to find them in any crypto exchange that you want to borrow from.
8) Stable Coins Can Be Withdrawn For Personal Use
Most of the reasons people borrow cryptocurrency is that they want to use it for needs outside the exchange.
When such a need to borrow crypto comes, stable coins is a good choice to borrow.
When you borrow stable coin, you can withdraw it and use for other personal needs.
This is because a lot of times you may have an urgent need for funds but do not want to sell your crypto.
This is very common when cryptocurrencies are in a bullish season.
When this occurs, it becomes hard for you to easily sell your cryptocurrency.
To be able to solve your financial need, the next option might be to borrow a crypto and use your crypto as a collateral.
The best bet for the borrowing will be a stable coin.
This is because you will easily withdraw it and when it is time to repay, the borrowed amount will not be higher than what you borrowed.
9) Stable Coins Have a Large Market Pair To Trade Other Cryptocurrencies
When it comes to the cryptocurrency that has the largest trading pairs, stable coin wins the contest.
With stable coins, you have access to a lot of trading pairs you can trade and earn passive income.
This is why it is good to borrow stable coins from crypto loan.
This will give you the opportunity to trade other cryptocurrencies and make money from it.
This is a skill that a lot of crypto users use to make money.
I have made use of it several times and it is a very profitable way.
This is because the interest you pay for the crypto loan is very small compared to the profits you stand to make if done well.
When you are done with the trading, you can repay the borrowed stable coin and then pocket the remaining profits.
10) Interest Rate From Borrowing Stable Coin Is Lower
Before you borrow any cryptocurrency, always check the interest rate to pay for other cryptocurrencies.
When you do this, you will observe that the crypto with the lowest interest rate are stable coins.
This makes stable coins a good choice when you want to borrow cryptocurrencies.
This low interest rate will make you pay less when you want to repay your crypto loan.
This is also good for crypto traders that borrow cryptocurrency to trade for profits.
The low interest from borrowing stable coins makes the whole process more profitable.
This is because you stand to make more profit when you subtract the borrowed stable coins and its interest from the money you make from the trading.
If the interest rate on borrowed crypto is high, it will affect the amount in profits that you earn after paying the borrowed crypto and its accrued interest.
Conclusion On Reasons To Borrow Stable Coins From Crypto Loan
Anytime cryptocurrency is borrowed, the aim is to pay back the same capital with the accrued interest when it is time to repay.
Also the interest charged for borrowing a crypto should not be too high so that it may not affect profit of those who borrow to trade.
Stable coins have a solid foundation for low interest rate on loan and price stability when you want to borrow crypto.
This is why you should borrow stable coins if a need to borrow cryptocurrency arises.
If you have any question, notify by using the comment section.
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