Bitcoin lending is making a quiet comeback with tighter controls, but volatility still threatens sudden liquidations.
Bitcoin lenders are betting that tighter controls and clearer risk management can rebuild trust in a sector still haunted by the collapse of predecessors Celsius and BlockFi.
Major Bitcoin lenders of the previous cycle imploded after turning user deposits into undercollateralized loans. When Bitcoin (BTC) prices fell and liquidity dried up, billions in customer funds were frozen or gone.
But those implosions don’t prove that crypto-backed loans are doomed by design. The failures were largely the result of poor risk management rather than the model itself. Some platforms are now taking the right steps, such as overcollateralization, while enforcing stricter liquidation thresholds, according to Alice Liu, head of research at CoinMarketCap.
