What is the collateral? What's the difference between collateral and mortgage?
The fundamental difference between collateral and the mortgage is whether to transfer the possession of the collateral.
When mortgage, the possession of the secured property is still owned by the mortgagor, and the creditor does not have direct disposal rights over the collateral.
When collateral, the possession of the secured property is owned by the pledge institution. When certain conditions stipulated in the contract are met, the pledge institution has the right to deal with the collateral.
Why crypto-backed loans use "Collateral" rather than "Mortgage"?
1 Collateral for a mortgage must be transferable, like real property.
2 Property such as stocks, cash, crypto-assets, etc, can only be used for collateral.
What is LTV？How to calculate LTV?
The pledge rate refers to the ratio of the debt amount to the value of the collateral.
(Principle+Total Interest+Total Penalty Interest-Repaid Amount)
LTV= --------------------------------------------------------------------------------------------- ×100%
Collateral (Crypto asset) reference price×Collateral (Crypto asset) Amount
For more detail, please check each product rules.
What is the collateral reference price?
In general, Matrixport selects a number of fixed data sources as the reference price from the following major exchanges, which is transparent to customers: Poloniex, OKEx, Huobi, Bittrex, Binance, Kraken, Itbit, Gemini, Coinbase, Bitstamp, Bitfinex, etc.
Why set an initial LTV?
On one hand, this will prevent the risk of default. On the other hand, Matrixport will make up the loss of borrower default and the cost caused by processing the collateral.
In the bear market, in order to prevent the collateral decreasing price, Matrixport will take more frequent measures to maintain the initial LTV. If customers don't have enough collateral balance, the collateral is at the risk of being sold. So a reasonable initial LTV will ensure customers get back their principle.
Is the LTV as high as possible?
The answer is No. The initial LTV will be affected by the spread of futures and spot market, price fluctuations range and the trend.
When the collateral value falls, the denominator in the formula becomes smaller and the LTV increases accordingly.
A higher the LTV means a higher possibility of liquidation, so a reasonable LTV can effectively prevent the occurrence of liquidation.
What should customers do if the LTV increases?
If the LTV increases to a certain level, customers need to supplement collateral to increase the collateral total value. This is achieved by enlarging the denominator. Such action maintains the initial LTV and prevents it from reaching the warning line or the liquidation line.
How to pledge the crypto asset?
According to the instructions on the website, deposit enough crypto asset to Matrixport wallet (Like BTC) and start a loan, then your crypto asset will be pledged.