- Coinbase was the company that obtained the first Bitcoin (BTC)-backed loan from Goldman Sachs.
- In case the price of BTC retraces to a large extent, Coinbase will have to increase the collateral.
- Experts are of the opinion that this could be an essential step for the crypto industry.
It has been revealed that coinbase, the most relevant crypto exchange in the United States, has been the company that obtained the first loan backed by Bitcoin (BTC) granted by Goldman Sachs.
Last week, Bloomberg revealed that a Goldman Sachs spokesperson had disclosed that the first BTC-backed loan it would be awarded by the Wall Street banking giant. However, at the time the details were quite limited.
Until, on May 3, 2022, Bloomberg reported whate Goldman Sachs’ first line of credit backed by BTC would have been granted to Coinbase. The goal, ostensibly, is to bring Wall Street money into the crypto ecosystem.
Building a new bridge between Wall Street and cryptocurrencies
Sometimes, when it comes to cryptocurrencies, it can be thought of as a completely isolated market, that is, not connected to the traditional financial system.
However, although one day it really was like that, the increase in the demand for cryptocurrencies has led to the building of bridges between these two seemingly different worldsand this is precisely what Goldman Sachs is doing together with Coinbase: Building a connection point between cryptocurrencies and traditional finance (TradFi).
According to Bloomberg, Brett Tejpaul, director of Coinbase Institutional, explained that this action is the first step “in the recognition of cryptocurrencies as collateral”.
How much is the loan?
Although the US dollar value of the loan was not disclosed, we can assume that this was guaranteed a portion of Coinbase’s total Bitcoin holdings; which are approximately 4,487 BTC.
A detail that was previously known is that the loan has a 24-hour risk management. However, should the Bitcoin price decline significantly, Coinbase will need to increase the collateral or else it will be liquidated.
It’s something new?
Yes and no. In the ecosystem there are multiple ways in which loans can be obtained and even lend. It happens mostly in protocols belonging to Decentralized Finance (DeFi). However, Bitcoin-backed loans are something totally new for Wall Street.
It is a historical fact! Those who have been in the crypto ecosystem since its inception will know that for a long time Bitcoin was judged and devalued by companies and Wall Street leaders. And now, a few years later, more and more people recognize its relevance.
According to Yahoo Finance, Jae Yang, CEO of Tacen, explained to GOBankingRates that cryptocurrency-backed loans will become a massive industry any day now.
Also, in a report by Arca, an asset management firm, revealed that potential borrowers are looking for more such options. “These types of bilateral agreements are rarely done in a vacuum; it is much more likely that Goldman is seeing a lot of demand for this type of transaction and is just testing the waters before making a bigger impact,” according to the report.
“[Este préstamo] demonstrates the willingness of institutions to use new tools with old techniques”, added the report.
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