Top cryptocurrency exchange Coinbase was given a loan by Goldman Sachs against Bitcoins that were used as collateral assets. It is a move sure to strengthen links between traditional banking avenues and cryptocurrencies.
Though the loan amount was not disclosed, it has come to light that the collateral was based in part on Bitcoin holdings by Coinbase. Coinbase had cryptocurrencies worth $566M in 2021 and that included around $183M in Bitcoins.
Coinbase Institutional head Brett Tejpaul. The collaboration between Coinbase and Goldman is a big stride in the acknowledgment afforded to cryptocurrencies as collateral and strengthened the link between crypto and fiat economies. The loan terms from Goldman Sachs include round-the-clock risk management.
Coinbase Loan With Crypto Collateral First By Conventional Bank
While offering loans against cryptocurrencies as a security, is common in the cryptocurrency industry. But this is the first time that a major conventional bank has accepted crypto as collateral. The crypto tied-up in the decentralized finance economy was only $275M in 2019 and has expanded rapidly to over $14B by 2021.
But it is the first time that an established commercial bank has given a loan with cryptocurrencies as collateral. The loan given to Coinbase against Bitcoins will be a boost of confidence for the cryptocurrency market. This market has been overlooked by the finance and banking sectors, mainly due to extremely high volatility in crypto prices.
This has been mainly due to the high volatility of cryptos. For instance, the price of Bitcoin was $69,000, dropping to below $38,000 at present, a 50% drop in 5 months. On the other hand, the price of Dogecoin saw an astronomical increase of 8,300%, crossing the price of even Bitcoin.
Why do much traditional banking and financial institutions consider Crypto a menace to traditional forms of banking? But the growing value and interest in cryptos have meant that come around to explore ways to try their hand at it.