The ongoing bear market on cryptocurrency markets is too harmful to industry lenders, but the concept of crypto lending can still survive the bloodbath, according to some industry experts.
Cryptocurrency lending is a type of crypto service that allows borrowers to use their crypto assets as collateral to get loans in fiat currencies like the United States dollar or stablecoins like Tether (USDT). The practice allows users to get money without having to sell their coins and repay the loan at a later date.
According to Josef Tětek, Bitcoin (BTC) analyst at the crypto cold wallet firm Trezor, crypto firms that run their business on a fractional-reserve basis are exposed to greater risks during bear markets.
In traditional banking, the fractional-reserve model is a system where only a fraction of deposits is backed by actual cash. Crypto lending companies are “definitely running a fractional-reserve business” to provide yields to their customers, according to Tětek.
“Exchanges and...
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