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Bitget's Crypto Loan at a Glance
Beginner
2023-11-07 | 5m
TL;DR
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Bitget Crypto Loan allows users to pledge a certain amount of token A to borrow a certain amount of token B, helping to leverage users' funds.
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Unlike DeFi Loan, Bitget Crypto Loan offers several advantages such as stable interest rates, simplicity in operations, no on-chain gas fees, and enhanced security.
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Crypto assets borrowed from Bitget's Crypto Loan can be used freely.
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To avoid liquidation, you can reduce your LTV by depositing more collateral or repaying part of your loan.
What is Bitget's Crypto Loan?
Crypto Loan refers to the process of using
cryptocurrency assets as collateral to borrow other cryptocurrencies. In other words, users can borrow a certain amount of token B by pledging a specific quantity of token A, and they need to pay a certain amount of interest to the platform. To mitigate risks, over-collateralization is typically employed.
This is how
Bitget's Crypto Loan provides users with additional funds to leverage their assets, all while they retain firm control over their pledged crypto assets. Currently, Bitget Crypto Loan only supports fixed-term borrowing, where the borrowing interest rate remains the same for the duration of the term. However, users are required to repay the loan within the stipulated period, and in case of late repayment, the overdue portion will incur 200% of the loan's original interest rate.
What is the Loan-To-Value (LTV) Ratio?
The Loan-to-value (LTV) ratio is one of the most important risk assessment indicators in
Crypto Loans, with LTV ratio = value of liabilities ÷ value of collateral.
The Loan-to-value ratio (LTV) fluctuates with changes in the coin's price and interest receivable. To mitigate the risk of collateral shortfall, we set three risk control lines for the Loan-to-value ratio based on the risks associated with the collateralized coin. The three risk control lines for an order are determined by the collateral coin selected at the time of borrowing.
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Initial LTV: The initial LTV ratio is used to determine the maximum loan a user can obtain based on their collateral amount. Assuming the initial LTV of BTC is 65% and you pledge 1000 USDT worth of BTC, then you can borrow up to 650 USDT worth of other assets.
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Margin call LTV: When the LTV ratio reaches the margin call LTV, the system will notify the user to supplement their collateral. It represents that the order has reached a higher level of risk.
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Liquidation LTV: When the LTV ratio reaches the liquidation LTV ratio, the collateral is liquidated and the order closed.
Differences Between Bitget Loan and DeFi Lending
Bitget's Crypto Loan stands out from DeFi lending with its fixed interest rates, no requirement for external addresses, simpler borrowing operations, and no gas fees.
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Comparison item
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Bitget Crypto Loan
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DeFi Lending
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Interest rate fluctuation
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Low (fixed term and interest rate)
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High
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External address requirements
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N/A
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Yes
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Borrowing operation
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Simple (on-chain operation not required)
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Complex (on-chain operation)
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Cost
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No gas fee
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Gas fee required
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Risk
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Individual operational risk
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Smart contract risk
Oracle risk
Liquidation risk
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Identity verification
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Yes
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N/A
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Available Cryptocurrencies for Collateral and Borrowing
Currently, Bitget supports collateralizing/borrowing various tokens such as Bitcoin (BTC), Ethereum (ETH),
Tether (USDT), and more. Please visit the
Bitget Crypto Loan homepage for a complete list. It is worth noting that Bitget Crypto Loan does not support collateral loan pairs of the same cryptocurrency. For instance, you cannot use BTC as collateral to borrow more BTC; you can only borrow BTC by using a non-BTC cryptocurrency asset as collateral.
Additionally, the maximum borrowing limit is determined by your account limit and the available funds in the pool, taking the lower of the two into account. Account limit refers to the individual borrowing limit per cryptocurrency. Currently, the minimum amount for a single loan is 200 USDT, calculated based on the index price of the borrowed cryptocurrency in relation to USDT. Please note that this limit is for the initial product and is subject to subsequent changes.
Utilizing Crypto Loan Assets
Once you borrow from Bitget's Crypto Loan, you can decide how to use the borrowed crypto assets. You are free to use the borrowed assets, including trading them in the spot m arket, depositing them into Bitget's financial products, or withdrawing them from Bitget, and more. However, the pledged collateral remains in Bitget's Crypto Loan as security for the crypto assets you borrowed.
How to Secure a Crypto Loan on Bitget
First, open the
Bitget Crypto Loan homepage. Next, select the crypto assets you wish to borrow and click
Borrow. Then, select your preferred
Loan Term type, the assets you want to borrow, and the collateral from your spot account. Carefully review the loan details including interest rate, initial LTV, margin call LTV, and liquidation LTV. After ensuring the information is correct, click
Confirm to submit your loan application. Upon confirmation, your collateral will be deposited into the Crypto Loan system, and the funds will be automatically released.
Click to learn more about Bitget's Crypto Loan.
Interest Calculation and Loan Liquidation
Interest = loan × (daily interest rate ÷ 24) × hours in the term
Interest is calculated on an hourly basis with a minimum accrual time of one hour, less than one hour is calculated as one hour, and for each full hour that passes, the accrual time increases by one hour.
Loan liquidation means that the lender has the right to take ownership of your collateral if you do not fulfill your obligations. This may occur, for example, when the value of the collateral decreases or when the value of the borrowed assets increases over time due to accrued interest. In other words, liquidation is triggered when the LTV exceeds the liquidation LTV.
To facilitate loan repayment during the liquidation process, the collateralized assets will be converted to the borrowed coin at the prevailing marke t price on the spot
market. The system liquidates 50% of the collateral in each attempt until the LTV ratio is lower than the initial LTV ratio. If the remaining collateral after partial liquidation is 100 USDT or less, the position will be fully closed by the system. A 2% transaction fee will be charged on the liquidation amount, and the remaining assets will be returned to the user's spot account.
To avoid liquidation, you can reduce your LTV by either depositing more collateral or repaying part of your loan. It is highly recommended that you monitor your LTV and keep it low to avoid liquidation.
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