Why Direct Onchain Assets Offer Better Loan Terms
The crypto lending market is evolving, with onchain collateral increasingly seen as a superior option compared to exchange-traded funds (ETFs). According to Fabian Dori, Chief Investment Officer at digital asset bank Sygnum, lenders prefer direct token holdings because of their liquidity and accessibility in real time.
Dori explained, “It’s actually preferable to have the direct tokens as collateral, because then you can do it 24/7. If you need to execute a margin call on an ETF on Friday at midnight, when the market is closed, then it’s more difficult. So, direct token holding is actually preferable from that point of view.”
One of the most important advantages for borrowers is the ability to access higher loan-to-value (LTV) ratios. This means lenders are willing to provide larger loans against assets like Bitcoin, Ethereum, or other accepted tokens because these can be liquidated instantly if needed.
A higher LTV ratio allows borrowers to unlock more capital without needing to post excessive collateral, while a lower ratio limits credit availability. This flexibility makes crypto-backed loans an increasingly attractive option in both institutional and retail markets.
Revival of Crypto Lending After Market Turbulence
The crypto lending industry suffered a major setback during the 2022 bear market, when several lending firms collapsed. However, the sector is gaining momentum again as centralized institutions cautiously return and traditional finance (TradFi) firms begin to accept crypto as valid collateral.
Financial institutions are gradually integrating crypto lending into their services. For example, Figure Technology, a crypto-backed lending platform, recently debuted on the Nasdaq exchange, signaling Wall Street’s growing interest in blockchain-based credit solutions.
The increasing reliance on onchain collateral highlights a shift toward more efficient, 24/7 financial systems. As adoption grows, experts believe crypto loans could become a mainstream product, offering borrowers better terms, higher flexibility, and faster execution than traditional lending products.
The move toward onchain collateral could mark a pivotal step in merging traditional finance with the digital asset economy, potentially reshaping global lending models.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.
