| Cryptocurrency | Price (USDT) |
|---|---|
| BTC | $107200.9800000000 |
| ETH | $2426.7960000000 |
| BNB | $647.1394100000 |
| XRP | $2.1778420000 |
| ADA | $0.5631126000 |
| SOL | $149.8122000000 |
| DOGE | $N/A |
| DOT | $3.3867000000 |
| LTC | $85.9001000000 |
| LINK | $13.3316700000 |
Category: CRYPTO NEWS
The post Bitcoin Loans Are Back, But Rehypothecation Still Lingers appeared on BitcoinEthereumNews.com. Bitcoin lenders are betting that tighter controls and clearer risk management can rebuild trust in a sector still haunted by the collapse of predecessors Celsius and BlockFi. Major Bitcoin lenders of the previous cycle imploded after turning user deposits into undercollateralized loans. When Bitcoin (BTC) prices fell and liquidity dried up, billions in customer funds were frozen or gone. But those implosions don’t prove that crypto-backed loans are doomed by design. The failures were largely the result of poor risk management rather than the model itself. Some platforms are now taking the right steps, such as overcollateralization, while enforcing stricter liquidation thresholds, according to Alice Liu, head of research at CoinMarketCap. “Better transparency and third-party custody also help to reduce counterparty risk compared to opaque models like Celsius,” she told Cointelegraph. But even as some term sheets now promise no rehypothecation and lower loan-to-value (LTV) ratios, a sudden price swing in Bitcoin can still put lending models under stress. Some crypto lenders still rehypothecate to offer better borrowing rates but also ensure investors are aware of risks. Source: Ledn Bitcoin loans are evolving from Celsius-era models The downfall of lenders like BlockFi and Celsius unveiled flaws in the way early crypto lenders managed risk. Their models relied on rehypothecation, poor liquidity management and overleveraged bets wrapped in an opaque structure that gave clients little insight into how their assets were being managed. Rehypothecation is a practice borrowed from traditional finance, where brokers reuse client collateral for their own trades. It’s a common and regulated strategy, but it’s typically capped and disclosed to clients with strict reserve requirements. Platforms like Celsius and BlockFi routinely reused customer deposits, often without clear disclosure of capital buffers or regulatory limits, exposing users to counterparty and liquidity risks. The key difference was that Celsius aggressively…
2025-06-28T02:38:09+00:00