According to a joint study by Arcane Research and Bitstamp, the unique properties of Bitcoin, which include the “most portable commodity,” are likely the factors contributing to the increasing use of crypto as a collateral asset.
Bitcoin unsurpassed
This is borne out by the data from the study, which shows that around 420,000 bitcoins were used as collateral for various loans in the credit markets in the fourth quarter of 2020. That number is almost double the 213,000 bitcoins that were used as collateral in the fourth quarter of 2019.
In a further boost to the case as the best collateral asset, the study results suggest that the leading crypto asset is unrivaled when compared to traditional assets like “government bonds and cash-based securities”. For example, the results claim that only Bitcoin (BTC) is “an asset with no counterparty risk and no credit risk”. In addition, BTC is “available for global trade around the clock, 365 days a year”.
The Arcane Research and Bitstamp study touted the superiority of some of these traits:
Bitcoin can be transferred instantly, almost for free, at any time of the day, any day of the year and with full finality around the world. No other asset can compete with these characteristics today, making Bitcoin the perfect collateral asset for the future.
Bitcoin share of the collateral market is still negligible
Despite the immense potential of the crypto asset, the study results suggest that BTC is only a tiny fraction of the $ 20 trillion collateral market today. To illustrate this fact, the researchers at Arcane Research estimate that “around 625,000 BTC is used as collateral in the crypto market today, or approximately $ 30 billion”.
According to the researchers, this figure is based on “estimates of the collateral held in the derivatives market in relation to secured Bitcoin loans and token BTC in decentralized financing (defi)”. When compared to the overall collateral market, this number suggests that “Bitcoin collateral now only represents 0.15% of the total collateral market”
Still, the study assumes that BTC’s share of this market is growing rapidly and the potential for a trillion dollar market remains.
How do you rate BTC’s share of the overall collateral market? Let us know what you think in the comments section below.
Tags in this story
Arcane Research, Bitcoin Collateral, BTC, Cash, Collateral, Collateral Market, Crypto Assets, Crypto Market, Decentralized Finance, Government Bonds, Portable Assets
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