What is the difference between “bitcoin loan” and “bitcoin-backed loan”

20 March 2020
Read: 5 min

Why to apply for a loan on Biterest

All the deals on Biterest are made solely for the purpose of receiving a USD loan against bitcoin in order to provide the Biterest user with an opportunity to save their bitcoin for the future.

Biterest does not contribute to the receiving of a cryptocurrency in a loan, only provides an opportunity to receive bitcoin-backed loans. While you can borrow USD and hodl your bitcoin as collateral on Biterest, there is no need to cash out bitcoin to fiat or other cryptocurrency.

Double profit of bitcoin-backed loans on Biterest

All loans are fixed is the US dollars. Therefore, the loan repayment amount consists of loan principal (USD) and accrued interest (USD).

For example, you applied for a loan of 1200 USD at a BTC exchange rate of 8000 USD, the amount to receive was 0.15000000 BTC. The collateral amount has to be 20% higher than the loan amount, so that you needed to deposit 1440 USD or 0.18000000 BTC.

Consider an example:

Initial Bitcoin rate: 8000 USD/BTC;
Loan amount: 1200 USD (fixed);
Amount to receive: 0.15000000 BTC;
Initial collateral value: 1440 USD;
Collateral: 0.18000000 BTC (fixed);

20 days later, the BTC price increased by 30% to 10400 USD, so your collateral value increased from 1440 USD to 1872 USD.

The repayment amount is 1207,92 USD, because the loan principal is 1200 USD and the interest is 7,92 USD (1200 x 0,033% x 20). Hence, if you repay the loan in BTC, you will refund 0.11614615 BTC (1207,92 / 10400) which is 0,03385383 BTC less than you initially borrowed.

Current Bitcoin rate: 10400 USD/BTC (+30%);
Collateral: 0.18000000 BTC (fixed);
Current collateral value: 1872 USD (+30%);
Loan repayment amount: 1207,92 USD;
Final amount to repay: 0.11614615 BTC (-23%);

As a result of an increasing bitcoin value, you received income not only from the growth of the collateral value by 30% but also won on the difference between the initially received amount in BTC and the amount to repay. Although your repayment amount increased by 7,92 USD, you would repay in bitcoin less by 0,03385383 BTC or 352 USD (0,03385383 x 10400).

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How to invest in Bitcoin with minimal risk?
28 May 2020

This is the second part of the articles where you will learn how to protect your bitcoin investment with the help of bitcoin-backed loans on Biterest.

How to repay a loan and close a crypto credit line on Biterest
10 April 2020

The loan period starts at the time of the loan issuing and has no fixed maturity date. You can use the money as much as you need and repay the loan partly or in full at any time