CryptoSlate
US credit-card balances rose $22 billion to $1.29 trillion in the third quarter, the New York Fed reported. Coinbase advertises crypto-backed loans from 5.1%, but a $10,000 payout at 40% initial loan-to-value requires $25,500 in Bitcoin once a financed fee is included.
A one-year illustration puts card interest at $2,236 on a constant $10,000 balance using the Federal Reserve's 22.36% measure for accounts assessed interest. At a constant 5.1%, the Coinbase loan's modeled interest and processing fee total $720.20. The comparison excludes compounding, rate changes and other costs; Coinbase's rate is variable and a monthly platform fee may apply.
The lower rate comes with liquidation risk. At an illustrative 86% liquidation threshold and constant debt, collateral starting at 40% LTV would reach that threshold after a roughly 53.5% price fall. Unpaid interest can shrink that buffer.
Frequently asked questions
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How much did US credit-card balances rise in the third quarter?
Balances increased by $22 billion from the previous quarter to $1.29 trillion, according to the New York Fed.
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How much Bitcoin backs the illustrative $10,000 Coinbase payout?
At a 40% initial loan-to-value ratio, the payout requires $25,500 in Bitcoin after a financed processing fee is included.
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What does the one-year borrowing cost comparison show?
The illustration puts card interest at $2,236 and the Bitcoin-backed loan's interest plus processing fee at $720.20. It excludes compounding, rate changes and other costs.
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Is Coinbase's advertised 5.1% borrowing rate fixed?
No. The loan rate is variable, and a monthly platform fee may also apply.
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How does a Bitcoin price drop affect the liquidation buffer?
At an illustrative 86% liquidation threshold and constant debt, a loan starting at 40% LTV would reach the threshold after a roughly 53.5% fall in collateral value. Unpaid interest can shrink the buffer.
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