Bitcoin has become synonymous with the words borrowing and lending. The same is true for traditional finance, where borrowing and lending are still a large part of the ecosystem. But, these are not interconnected. The distrust in traditional finance towards bitcoin is the main reason. This digital asset, which is largely unregulated, did not offer the backing that tradfi needed. That was up to now.
Tradfi – Bitcoin-Backed Lenders
Goldman Sachs is an investment bank that has launched Bitcoin-backed loans. Goldman Sachs’ crypto offering has been expanded to include bitcoin-backed loans, which is an unprecedented move by a large U.S. bank. This secured loan facility is unique in that it will allow cash to be collateralized with Bitcoin.
Number Of Bitcoin Millionaires On The Rise As Accumulation Continues| Number Of Bitcoin Millionaires On The Rise As Accumulation Continues
Due to the volatility and non-regulated nature of cryptocurrency, most banks are reluctant to accept it. However, many institutions now offer services that are centered around cryptocurrency, such as trading and asset management. These services are far from the cash loans that utilize bitcoin as collateral.
Wall Street will embrace cryptocurrency faster than other finance groups, and this move will be a game changer for traditional finance.
Source (BTCUSD) on TradingView.com| Source: BTCUSD on TradingView.com
Goldman Sachs’ view on bitcoin has changed over the years, without doubt. Two years ago, Goldman Sachs did not consider cryptocurrency an asset type. It has since recognized the currency as an asset and has offered clients a means to trade it. The company also has a team of crypto researchers that produces reports about the cryptocurrency market. These reports, which have been published over the past months, are mostly positive toward digital assets like Bitcoin and Ethereum.
Crypto Collaterals
While this may be the first major bank to accept Bitcoin as collateral in a loan agreement, it’s not a new concept. Users can borrow from their cryptocurrency holdings since the rise of decentralized finance (DeFi). DeFi protocols are available for this purpose.
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This is why traditional finance has been playing catch-up with DeFi, which doesn’t require any paperwork in order to get a loan. It can bridge the gap between decentralized and traditional finance by offering a deal similar to the one Goldman Sachs offers.
Bitcoin trades at $38,927 as of the writing. This is down by 2.64% over the past 24 hours.
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