Bitcoin-Backed Loans Add Debt to Leveraged Crypto Trading

Bitcoin holders borrowing to finance leveraged trading retain their original investment and take on another source of exposure. Their coins continue to fluctuate, the financed position produces its own gains or losses, and the dollar loan remains payable regardless of either result. The attraction is access to trading funds without selling cryptocurrency upfront. There’s risk involved, too, tied to a volatile asset supporting debt while using the proceeds for a position that already involves leverage. Perpetual futures provide exposure to asset prices without a conventional expiration date. The financing concerns futures trading, rather than establishing bitcoin-backed loans for ordinary sports or election wagers. For borrowers, the collateral and the financed trade require separate accounting. A profitable futures position doesn’t necessarily offset a decline in pledged cryptocurrency.

First reported by PYMNTS.com. This page is a short excerpt; the full text is theirs.