The 24/7 nature of onchain markets makes spot crypto collateral preferable to lenders than crypto held in investment vehicles like ETFs.
Fabian Dori, the chief investment officer at digital asset bank Sygnum, says that banks offering crypto-backed loans prefer crypto collateral in the form of onchain assets rather than exchange-traded funds (ETFs), and using onchain collateral can benefit borrowers.
Dori said that onchain assets are more liquid, allowing lenders to execute margin calls for crypto-backed loans on demand and offer higher loan-to-value (LTV) ratios to borrowers because the lender can liquidate the collateral in real-time. Dori told Cointelegraph:
Loan-to-value ratios in crypto refer to the total amount of a loan versus the collateral backing the loan, like Bitcoin (BTC), Ethereum (ETH), or any other tokens accepted by the lender.
