According to the findings of a joint Arcane Research and Bistamp study, bitcoinâ€™s unique characteristics, which include it being â€œthe most portable assetâ€, are the likely contributing factors behind the increasing use of the crypto as a collateral asset.
This is evidenced by the studyâ€™s data which shows that approximately â€œ420,000 bitcoins were used as collateral in various loans in the lending markets in Q4 of 2020.â€ This figure is nearly double the 213,000 bitcoins that were used as collateral in Q4 of 2019.
In another boost to the case as the best collateral asset, the study findings suggest when compared to traditional assets like â€œgovernment bonds and cash-based securities,â€ the leading crypto asset is unrivaled. For instance, the findings assert that only bitcoin (BTC) â€œis an asset without both counterparty risk and credit risk.â€ Additionally, BTC is â€œavailable for trading 24/7, 365 days a year, all over the world.â€
In touting the superiority of some of these characteristics, the Arcane Research and Bistamp study states:
Bitcoin Share of Collateral Market Still Negligible
Meanwhile, despite the crypto assetâ€™s immense potential, the study findings suggest that BTC only accounts for a minuscule of the $20 trillion collateral market today. To illustrate this fact, the researchers from Arcane Research estimates that â€œaround 625,000 BTC are used as collateral in the crypto market today, or approximately $30 billion.â€
According to the researchers, this number is based on â€œestimations of collateral held in the derivatives market, in relation to bitcoin collateralized lending and tokenized BTC in decentralized finance (defi).â€ When compared to the total collateral market, this number suggests that â€œbitcoin collateral only accounts for 0.15% of the total collateral market today.â€
Nevertheless, the study still asserts that BTCâ€™s share of this market is growing rapidly and that the potential for a trillion-dollar market remains.
What is your view concerning BTCâ€™s share of the total collateral market? Tell us what you think in the comments section below.
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