Why do we choose to use Bitfinex for lending?
Bitfinex's lending platform has been around for an extended period, attesting to its stability and credibility in the market. The platform's earnings are not generated out of thin air but are a result of market supply and demand, facilitated by borrowers.
USD Lending Option Bitfinex also provides a lending option in USD, effectively mitigating the risks associated with stablecoin de-pegging. With an average yield ranging between 10-30%, it offers an excellent return when measured in USD.
Safety Mechanisms
To ensure the safety of the lender's principal and interest, Bitfinex employs four robust mechanisms
1.Asset Collateralization
Borrowers are required to collateralize at least 30% of their loan amount, allowing them to borrow up to 100% of their collateral value (3.3x leverage).
2.Asset Usage Limitations
Borrowed assets can only be used within the Bitfinex exchange to trade major cryptocurrencies and cannot be withdrawn for other purposes. This ensures that borrowers focus on arbitrage opportunities within the platform.
3.Automated Liquidation
Bitfinex has an automatic liquidation system in place that forces borrowers to repay their loans in the event of a significant loss. This system activates before the collateral drops below 30%, ensuring that the lender's principal and interest are covered.
4.Bitfinex Guarantee
In cases of extreme market volatility where the platform's automated liquidation process may fail, Bitfinex commits to absorb the losses and compensate lenders for both their principal and interest under reasonable circumstances.
Past Performance During Market Crashes Even during the substantial market drop on March 12, 2020, Bitfinex's liquidation mechanism remained unchallenged, safeguarding both borrowers and lenders from potential losses.
Last updated