Loans backed by crypto assets and their liquidity promise

As a result of the crypto bear market in 2018, many crypto-based companies are illiquid. Among these companies are crypto-mining firms and startups which raised funds in the form of digital coins.
Most crypto holders don’t want to sell their digital tokens at these depressed prices and are expecting a rebound in the market.
There is a new breed of startups: crypto loan companies, which aim at providing liquidity to the crypto market space.
These companies extend loans to individuals and companies in the form of a fiat currency and require crypto assets as collateral from the borrowers.
Some of the leading companies in this space: Galaxy Digital, BlockFi, Salt Lending, Genesis Capital, Aave, Sweetbridge and MoneyToken.
The interests rates on these crypto loans range between 10% to 20%.
The term length extends from weeks to 36 months depending on the creditor company.
To hedge against the liquidity volatility in the crypto market, these crypto loan companies usually demand a higher collateral. For example, a 1-0.35 ratio to hopefully prevent themselves from getting burned if prices fall drastically.
The 2018 crypto bear market seems to have boosted this kind of business as some companies have grown 10-fold such as BlockFi. Others are set to receive huge funding in 2019 with $250 million earmarked for Galaxy Digital alone.

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