What is a low loan-to-value ratio in the context of digital currencies?

1 answers

• May 08, 2022 · 3 years ago
  When it comes to digital currencies, a low loan-to-value (LTV) ratio means that the loan amount is relatively small compared to the value of the collateral. This ratio is used to assess the risk of default for lenders. In the context of digital currencies, borrowers can use their crypto assets as collateral to secure loans. The LTV ratio determines the maximum loan amount a borrower can receive based on the value of their collateral. A low LTV ratio indicates that the loan amount is a small percentage of the collateral's value. This can be advantageous for lenders as it reduces the risk of losing their funds in case of default. However, borrowers may prefer higher LTV ratios as it allows them to access more funds. It's important to find the right balance between the borrower's needs and the lender's risk tolerance when determining the LTV ratio in the cryptocurrency market.
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