This is a thought leadership article written by Helen Liu. Helen is the Chief Operating Officer of Bybit.

In the fast-evolving world of crypto and web3, education and content creation are essential pillars for mainstream adoption. The industry was once dominated by niche communities, but today it reaches a global audience through influencers, key opinion leaders (KOLs) and content creators who simplify complex blockchain concepts.

As the Chief Operating Officer of Bybit, I’ve had the privilege of witnessing firsthand how education is shaping the future of web3. My career has been rooted in innovation, adaptability and global collaboration. At Bybit, our focus is on making crypto more accessible to everyone. We've seen how crucial education and outreach are in bringing crypto to the masses.

Crypto content creators and key opinion leaders (KOLs) play a crucial role in making blockchain technology accessible. They break down complex topics, such as 

 into digestible content that caters to both beginning and experienced users. In addition, by providing clear explanations and real-world applications they help onboard new users, while strengthening the knowledge base of the existing community.

Furthermore, these influencers exert a significant impact on public sentiment and market adoption. Their ability to amplify trends, introduce new narratives and engage audiences makes them powerful forces who shape investment decisions and industry trends. Whether they’re focusing on technical analysis or storytelling, they bring deep expertise and authoritative insights that bridge the gap between technical innovation and mainstream awareness.

Transparency is critical, especially when it comes to sponsored content and potential conflicts of interest. Misinformation can be costly in crypto, and it’s crucial for creators to disclose partnerships and provide accurate information in order to maintain credibility and build long-term trust.

While promotional content is a natural part of influencer marketing, educational accuracy must remain a priority. Audiences deserve well-researched, balanced perspectives, rather than exaggerated claims. Creators must fact-check information, source credible data and present content that genuinely helps users navigate the crypto space.

Today’s crypto education takes place across multiple platforms — YouTube, X (formerly Twitter), TikTok and dedicated learning resources such as 

. While high-quality educational content is readily available, the challenge is ensuring that newcomers can differentiate between well-researched information and misleading narratives driven by hype.

Crypto content exists on a broad spectrum. On one end, platforms such as Bybit Learn and reputable analysts offer in-depth, fact-based insights. In contrast, social media trends often fuel misinformation, leading to speculation and unrealistic expectations. 

Striking the right balance between engaging content and factual accuracy is key to fostering an informed community.

Why Bybit sponsored the Crypto Content Creator Campus (CCCC)

At Bybit, we believe that education is fundamental to driving blockchain adoption. That’s why we were the title sponsor of the inaugural 

, held in Dubai in November 2024. This event brought together over 200 global influencers with a collective reach of over 1 billion followers, reinforcing the importance of high-quality content creation in regard to crypto.

Empowering creators with tools and knowledge

During the event’s opening panel, our CEO, Ben Zhou, emphasized that creators are more than just marketers — they’re educators and storytellers. He highlighted the value of long-term community engagement over short-term promotions, stressing that authenticity and trust must be the foundation of crypto content. Zhou also recognized the power of microinfluencers, who connect deeply with niche audiences and drive meaningful engagement.

Through initiatives like CCCC, we at Bybit aim to empower content creators with the tools and knowledge they need to produce high-quality educational content. The event also showcased innovative projects, such as the CCCC Hacker House Challenge, which demonstrated how blockchain can revolutionize content creation. 

ur involvement in such initiatives reflects our broader commitment to supporting innovation, education and the growth of the crypto-creator economy. 

This year, the CCCC conference will be held in Lisbon, Portugal on Nov 14 to 16, and you can find out more 

Responsible content creation is key to crypto industry growth

As crypto adoption continues to grow, content creators, influencers and KOLs will play an even greater role in shaping public understanding and engagement. Ethical, transparent and well-researched content is essential to building a strong and informed global community.

At Bybit, we’re committed to championing education, innovation and responsible content creation. Through initiatives like the Crypto Content Creator Campus, we aim to equip creators with the resources they need to educate and inspire audiences worldwide.

A future where crypto is widely understood and responsibly promoted depends upon collective efforts from creators, platforms and industry leaders. By prioritizing education and accuracy over hype, we can ensure sustainable industry growth driven by informed participation instead of speculation.

Beginner

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Content creation and education in the crypto industry

A market correction is a decline in the price of an asset by more than 10%. Though the dip can be fairly small, it usually indicates that the crypto had rallied far from its established trend. Learn how to trade during the correction.

As we’re nearing the end of the first quarter of 2025, US president Donald Trump’s administration has been in charge of the world’s largest economy for only about two months. But in this short period of time, the 47th POTUS has already been making an outsized impact on financial and crypto markets — as the threat of tariffs with many of America’s trading partners, government sector layoffs and a new paradigm in the relationship between the US and European economies have sent investor sentiment into the territory of fear. Both stock market sentiment indices and the major Bitcoin 

 indices are hovering between the orange and red zones of fear.

As of the time of this writing on Mar 17, 2025, the stock market’s primary gauge — the S&P 500 index — has declined by around 8% since its recent peak on Feb 19, 2025, while 

 (BTC) is down by 23% since its all-time high on Jan 20, 2025, the day of Donald Trump’s inauguration.

As the crypto market declines, investors are becoming more unsettled, wondering if this drop represents another blip on the typically mercurial radar of Bitcoin or a prelude to a steeper downturn. Is this the market correcting itself after recent (possibly overly) optimistic gains, or are we witnessing the start of something scarier? In this atmosphere, it's important to distinguish between a market correction and a more profound decline known as a 

. In this article, we cover what a crypto market correction is, how it differs from a bear market and — more importantly — how you can prepare for it as a cryptocurrency investor.

A correction is a market decline that typically ranges from 10% to 20%. It signifies a relatively small but still noticeable drop in asset prices. The crypto market undergoes more frequent corrections than the stock market, due to its inherently 

. Over the past year alone (to mid-March 2025), Bitcoin’s price has experienced at least six corrections. In comparison, the stock market's primary index — the S&P 500 — hasn't experienced a correction within the past year. However, it's quickly approaching just that, with prevalently negative investor sentiment a 9% decline from recent peaks.

Is a market correction the start of a bear market?

A market correction — especially if it leads to a rapid decrease in asset prices — might seem worrying at first, but it’s part of the market's natural rhythm. In most cases, corrections end with a market rebound, i.e., a bull market, as asset price drops lead to increased interest to 

. However, if a correction is caused by significant underlying issues — such as price bubbles that have built up over long periods, or wider economic declines — it can be a precursor to a 

, which is characterized by a significant drop of over 20% in the market as asset prices decrease.

 interchangeably. However, others distinguish between the two concepts. According to some definitions, a market crash is a significant but short-lived decline of over 20%, while a bear market is a prolonged period of depressed asset prices that may last for months, or even years.

It's important to distinguish between a crypto market correction and a bear market, as the two require different strategies and approaches. Market corrections generally don't require the type of drastic measures from investors that bear markets do. As we’ve noted above, some analysts refer only to prolonged crashes as bear markets, while others use the terms “crash” and “bear market” interchangeably. If we assume the latter definition, then any market crash of over 20% — whether short- or long-term — can be described as a bear market.

Note that the definitions of a correction (10% to 20% decline) and bear market (over 20% decline) originated in traditional finance. These definitions have been used for the crypto market as well, but due to its higher volatility, the crypto market experiences corrections and bear markets considerably more often than the stock market does.

We noted earlier that the last time the stock market experienced a correction — as measured by the S&P 500 — was between July and October 2023, around one and a half years ago. Even then, the decline in the index was contained to 10%, just meeting the definition of a correction. In contrast, the crypto market has experienced numerous corrections (and three crashes) over the past year alone, to Mar 17, 2025. The image below shows these three crashes, which resulted in the decline of the 

 by around 22–23% each time. Additionally, we’ve annotated the ongoing correction that started to develop on Mar 2, 2025 — just days after the market rebounded from its last crash. This correction has so far (in ten days) resulted in a 12% decline in the total market cap.

Evidently, the crypto market is much more accustomed to corrections and bear markets than the stock market is.

How to prepare for a crypto market correction

Crypto corrections often arrive after periods of overly optimistic buying. They may also be caused by negative sentiment when crypto gets hammered — once again — by another influential regulatory authority. Investor sentiment may also turn negative and lead to a correction when traditional markets are trending downward. The last scenario is what we’re witnessing right now — the new Trump administration’s penchant for tariffs and drastic changes to budgetary spending has sent stocks downward, and the cryptocurrency market has duly followed suit.

When a correction is on the horizon, what can you do to best protect yourself? Below, we list several strategies that can limit the impact of a crypto correction on your investments.

Consider reducing your long positions when you sense early signals of a market decline. Some 

 or oscillators turning downward, can help you identify a market peak and an imminent downtrend.

 is a preset instruction to sell an asset once its price drops to a specific level. It’s one of the best trading strategies to limit potential losses during a market slump. Stop-loss orders have two primary benefits. First, they free you from the necessity to monitor prices and continually close your positions manually. Secondly, and importantly, these orders help avoid emotional decision-making during volatile downturns.

Placing stop-loss orders is just the tip of the iceberg when automating your trades. You can also devise considerably more sophisticated automated trading strategies by using 

. Bybit offers a variety of these bots to help you set key parameters for your trading strategy and execute it in a fully automated fashion.

 lets you automate your grid trading — a strategy whereby a set of orders is placed at several points above and below a certain reference price for an asset. The price points above the current asset price are designated as sell orders, while those below the current price are reserved to trigger buy orders. The corresponding sell or buy order is executed when the asset's price reaches a pre-specified point in the grid.

Another useful trading bot for your correction arsenal is the 

DCA is one of the most valuable trading strategies when expecting a correction or finding yourself in the midst of one. It involves splitting your total planned investment amount into equal chunks that are invested at predetermined time intervals, e.g., monthly, fortnightly, weekly or even daily. You make your regular fixed investments regardless of how the market moves.

As with automated trading strategies, DCA helps remove the emotional aspect from your investing. When you anticipate a market downturn, emotional factors can easily creep into your decision-making. DCA is one key way to prevent your emotions from affecting your trades.

DCA also reduces the impact of market volatility, since you’re spreading your purchases over time instead of buying at a single price point.

The Bybit DCA Bot we mentioned above isn’t the only way to automate your DCA strategy — there’s also the 

 product, which lets you set up your regular DCA investments in a few easy steps.

In the event that a correction continues to develop into a crash, the most crucial step is to avoid being influenced by emotions. If you find yourself amid a market crash, remember that all crashes, just like all corrections, are followed by market rebounds. The bottom of the market isn’t going to fall off — profit-seekers, both retail and institutional investors, will sooner or later move in to buy the dip. In fact, this could be an excellent opportunity for you to acquire assets with strong fundamentals, and at bargain prices.

Thus, stay calm, plan for the long term when prices inevitably recover, stick to strategies that eliminate emotional trading — such as automated methods and DCA — and perhaps even consider buying high-potential assets while they remain undervalued during the crash.

The concept of market corrections sounds unnerving. But unlike protracted bear markets, they’re typically short-lived and followed by price increases. The key steps to take in a correction are to avoid emotional decision-making, reduce exposure as much as possible, place some stop-loss orders and employ strategies like DCA and automated grid trading.

Notably, while stock market investors aren't accustomed to frequent corrections and crashes, the crypto market experiences them every year, multiple times. And yet, the multiyear, long-term established trend of the market has remained upward ever since the word “cryptocurrency” entered the financial vernacular. A stock market investor might feel intimidated by a correction — and even feel like fainting at the thought of a crash — but a savvy crypto investor knows that corrections and crashes are business as usual. As such, be prepared, but don’t panic. We’ve been through crypto market crashes more often than Bitcoin has been declared dead.

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Crypto market correction: What it means and how to prepare

Ethena Labs and Securitize have launched Converge, a settlement network designed to bridge traditional finance (TradFi) and DeFi.

Daily top performer — PancakeSwap (CAKE)

The S&P 500 gained 0.64% as softer retail sales fueled Fed rate cut speculation. Investors await Wednesday’s Fed decision. Gold hit a record $3,005 as geopolitical tensions and trade concerns fueled safe-haven demand, with strong support from central bank and ETF purchases. Markets await the Fed’s policy decision. The Coindesk Indices, which tracks the broader crypto market, fell by 0.60%, with Bitcoin and Ether up by 1.66% and 2.12% in the past 24 hours. Trade these markets and more with up to 500x leverage on Bybit MT5 using this 

Today’s top performer is CAKE, up 27.9% after PancakeSwap MEV Guard extends wallet support for improved trade security.

PancakeSwap (CAKE), launched in September 2020, is a BNB Chain-based DEX for BEP-20 token swaps, offering lower fees and faster transactions than Ethereum-based rivals. 

 now supports more wallets on BNB Chain, including Trust Wallet and Rabby Wallet, enhancing protection against frontrunning and sandwich attacks. Users can enable MEV protection with a simple one-click setup for most wallets, ensuring safer and more reliable trading.

Check out the latest prices, charts, and data of 

Ethena Labs and Securitize have launched 

, a settlement network designed to bridge traditional finance (TradFi) and DeFi. The platform will integrate Ethena’s USDe, USDtb, and iUSDe stablecoins with Securitize’s tokenized assets, facilitating institutional on-chain participation. Converge will feature both permissioned and permissionless financial applications, supporting lending, trading, and structured products. Five protocols, including Aave Labs and Pendle, have committed to building on the network. Mainnet is set to launch in Q2 2025.

Yesterday, BTC spot ETFs saw $232.3 million in net inflows, driven entirely by non-GBTC funds, while GBTC recorded no flow.

, allowing users to complete tasks and earn points for future rewards. Existing users from the old platform receive a 1,500-point bonus. To join, create an account, fill in profile details, and complete quests requiring X, Discord, and MetaMask connections. Daily check-ins also grant rewards, with more quests coming soon.

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Ethena and Securitize launch Converge to bridge TradFi and DeFi

Bubblemaps is a data visualization tool for blockchains. It uses colorful maps of circles to show important details. Learn more about how it works here.

 prior to their purchases. There's a lot of valuable information available for cryptocurrencies, but accessing and understanding it takes time. Bubblemaps offers a revolutionary solution: a 

 visualization tool that makes it much easier for users to see how blockchains operate behind the scenes. Should you try working with Bubblemaps? To see if it's right for you, here's what you need to know. 

 is a data visualization tool for blockchains. It uses colorful maps of circles to show important details, such as token distribution and disproportionate 

 token ownership — thus making it easier for investors to identify both trading opportunities and scams.

 in 2022. Before he worked on Bubblemaps, Vaiman was the CEO of a cryptocurrency investment company called Cryptonavia. During his work there, Vaiman noticed how difficult it was for investors to get a clear idea of how projects were run. Though there was often plenty of data revealing warning signs behind a project, it was hard to access and process this data. 

Vaiman was inspired to create a website where people could get useful information quickly. His vision has appealed to many investors, and Bubblemaps currently has over $3.2 million in funding from investors like Sierranova Capital, ChainGPT Labs and Arcanum Ventures.

Bubblemaps’ main purpose is to make cryptocurrency data more accessible. Traditional blockchain explorers often provide strings of data that aren't particularly intuitive. Meanwhile, the Bubblemaps site not only acquires data for you, but also uses its mapping system to make issues far more obvious. With “bubbles” that highlight info, such as linked wallets, the system hopes it can allow everyday investors to make more informed choices.

Bubblemaps also aims to become a watchdog for 

 and market manipulation. It regularly uses its tools to identify problematic projects and to draw attention to them. While users can analyze their own investments with Bubblemaps, the project also hopes to help people who don't work with the project’s software. The site's blog and social media feeds try to warn users of potential fraudulent activities involving trending cryptos whenever they can.

Bubblemaps primarily functions as a collection of software and coding. Unlike some other ecosystems, it doesn't have many blockchain functionalities embedded into its system. Instead, it operates similarly to standard Web 2.0 websites. Its creators designed code that scrolls through data about blockchain wallets and addresses, and then uses additional coding and display tools to sort and organize this data into easily readable Bubblemaps.

The Bubblemaps application can be accessed directly from the company's main website. Its system also allows other sites to integrate Bubblemaps as a 

 screener. With just a few lines of code, Bubblemaps analytics are natively integrated into other 

The Bubblemaps system contains a variety of features meant to improve blockchain data accessibility. The following are some of the ways users can enjoy Bubblemaps services.

This is the main feature of the website. Its users can search for tokens and click on a token to see its map. This visual representation of data looks like a series of circles and lines. The circles represent wallets holding significant portions of a token's total supply: the larger the circle, the more tokens the wallet holds. Lines drawn between wallets represent transfers, and highlight interconnected addresses. Clicking on the circles highlights the wallet's owner, and depending upon their privacy settings, you may even be able to see which individual or organization holds the tokens. 

Intel Desk is a community-driven feature for investigation. Users vote on which tokens need to be more closely examined. Winning tokens are carefully examined by Bubblemaps’ scam-detection squad, and users are told if any fraudulent activities have been found among a token's interconnected addresses and wallet holders.

The Time Travel feature lets users look at the past activity of multiple blockchains. You can see how maps shift over time, in order to get an idea of what's happening on blockchains throughout a coin's entire lifespan.

Magic Nodes is an advanced feature that shows interconnected addresses. Instead of just looking at wallet owner labels, Magic Nodes looks at how the crypto is actually moving around. For example, it can identify multiple holders who are all paying their gas fees from one address, so that users can see when an entity is using intermediaries to manipulate the market.

Bubblemaps has already managed to achieve a lot. In addition to designing its visual interpretation of blockchain data, the site has also natively integrated with various partners on other DeFi platforms. 

. In addition to the release of the token, the system also plans to add multiple features linked to the token, including upgrades to cross-chain analytics, AI cluster interpretation and P&L computation. 

For the future, Bubblemaps hopes to expand further into the crypto space. By adding multiple blockchains to its app and integrating with more systems, Bubblemaps aims to become the premier crypto and DEX screener. 

The BMT token helps power Bubblemaps’ Intel Desk feature. Holders of BMT vote for the cryptos they’d like Bubblemaps to investigate. BMT is also used as the reward method for those whose proposals are chosen for Intel Desk.

Residing on both Solana and BNB Chain, BMT has a total token supply of 1 billion tokens. Of these, 27% were available at launch. The rest will be unlocked on a 

Though BMT was only released in March 2025, it's already experienced some wild price swings. The token debuted at around $0.16, but prices quickly dropped to $0.07. Currently, BMT’s price is stable in the $0.08–$0.10 range.Bankless Times 

 will help keep its price up, predicting that BMT might reach $0.30 by 2025. DigitalCoinPrice is slightly more cautious, but agrees that some sort of price rise is likely. Taking into account current market growth,DigitalCoinPrice 

Looking to trade Bubblemaps tokens? Bybit now offers the BMT/USDT Spot trading pair and BMTUSDT Perpetual contract. To get started, you’ll first need to create a Bybit account, then fund it with cryptocurrency and navigate to the 

To celebrate this listing, Bybit is holding 

 where you can earn a share of a 2,000,000 BMT prize pool. 

BMT was hotly anticipated leading up to its release. The Bubblemaps tool is a favorite of crypto investors, and many people are interested in supporting the new project. Furthermore, the coin's link to the Intel Desk feature could help stabilize its price and create demand.

However, keep in mind that there’s been some criticism of BMT. Using the Bubblemaps tool on the system's own coin reveals that an outsized portion of the total supply is held by a single wallet. This has led to some 

, and the token’s price has stayed fairly low since this issue arose. While it's possible there's a good explanation for this distribution pattern, a lack of user trust could still cause problems for the new token. 

Therefore, investors who are interested in working with BMT token holdings need to maintain some caution. Furthermore, the crypto market always exhibits some volatility, so be sure to take that into account. As always, 

 — and avoid putting all of your funds into a single coin.

Using the Bubblemaps tool is a simple and great way to visualize the data from traditional blockchain explorers — making it quick and easy to spot potential problems with token holdings and distributions. Now that Bubblemaps is moving to the next level of its road map, fans also have the opportunity to buy and sell BMT tokens. Thanks to the hype around the platform, even investors who don’t use Bubblemaps may want to explore BMT.

Intermediate

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Bubblemaps (BMT): Bursting crypto's complexity bubble

DeFi

Cryptocurrency lending allows investors to lend crypto to borrowers in return for interest payments. But what are the risks & should you invest in it? Learn more.

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Cryptocurrency lending is a feature of Decentralized Finance (

), in which investors lend cryptocurrencies to borrowers in return for interest payments. If you’re holding on to cryptocurrency with the expectation of future price appreciation, you might also receive steady passive income from your assets through lending. You could receive weekly or monthly interest when you deposit cryptocurrency in the wallet of a crypto lending platform.

On the borrowing side, crypto lending or crypto loan allows you to borrow fiat money (using your crypto as collateral) so that you won’t have to sell your cryptocurrency assets in an emergency. 

 refers to blockchain-powered financial applications, protocols, and platforms that can be used to manage money. These tools provide many of the same opportunities that traditional financial institutions do for fiat money.

Unlike the conventional financial system, 

 run without any centralized authority and are independent of banks, government-issued currencies, remittance platforms, and other traditional finance infrastructure.

DeFi offers an alternative to the existing traditional financial system and creates new solutions. It connects users in peer-to-peer (P2P) networks. This allows them to interact without knowing the other users because of underlying smart contracts, which safeguard each counterparty.

The smart contract that serves as the foundation for decentralized finance is transparent, open and self-executing, and doesn’t require supervision. Smart contracts can execute predetermined tasks, and users can access them using simple interfaces, as with regular applications. Because Etheruem was the first platform to introduce the concept of DeFi, most applications are built on the Ethereum blockchain.

Traditional lending and cryptocurrency lending both provide loans, but in different ways. 

A key feature of crypto lending is over-collateralization. Collateral is the security deposit pledged for a loan, and it can be liquidated in case of default. Over-collateralization means borrowers must provide up to twice the value of the loan amount they seek as a security deposit. Over-collateralization gives the lender comfort if the price of a highly volatile cryptocurrency crashes. 

 ensures lenders have a margin of safety. More importantly, borrowers don’t need a credit score to access crypto loans, unlike traditional bank lending. This means that cryptocurrency lending is more accessible to the under-banked, those with poor credit scores or without a credit history, and self-employed people who find it challenging to meet stricter traditional lending requirements.

While it takes several days of processing time for a traditional loan to clear, cryptocurrency loans are instant. 

What if you need money urgently but have most of it invested in assets? Selling those assets might incur capital gains taxes, and you would also miss any investment performance by dipping into investment capital. This is where crypto lending shines.

Decentralized lending platforms provide the opportunities to loan crypto without intermediaries. DeFi lending protocols enable lenders to earn interest on supplied digital assets while borrowers pay interest when taking the loan.

Let’s say you have 10 ETH, and an emergency that requires cash comes out of the blue. But you don’t want to sell any of your ETH because you’re convinced that prices are on the verge of soaring. You may also be afraid that if you liquidate any Ether now, you won’t be able to repurchase as much in ETH later. 

Here comes cryptocurrency lending to the rescue. Crypto lending platforms allow you to use your Ether as collateral and take out loans in USDT or any other 

. However, due to cryptocurrency’s volatility, you’ll have to over-collateralize the loan. That means you have to lock up significantly more ETH than the value you receive as a loan.

The lending platform will release your cryptocurrency once you’ve repaid the loan with the agreed-upon interest. And if the price of ETH has indeed appreciated, as you predicted, you will still have profited from it. 

You’ll only risk losing your cryptocurrency if you fail to repay your loan or if the value of your collateral (contrary to your optimistic outlook) falls below the value at which you borrowed.

Parties Involved in a Typical Crypto Lending Transaction

Cryptocurrency lending involves a borrower who needs liquidity but prefers to keep assets invested, a lender who wants passive income, and a lending platform. 

A borrower approaches a lending platform, such as Compound or Aave, for a fiat loan from a lender, using cryptocurrency assets like 

Once the lender and borrower have agreed to terms and conditions, including a specific interest rate, the borrower receives the cryptocurrency loan. Just as in a traditional bank loan, the lending platform releases the collateral to the borrower once the lender has been paid in full.

Cryptocurrency lending on DeFi crypto lending platforms lets borrowers and lenders interact directly without intermediaries. However, cryptocurrency lending is also available on 

 (CeFi) platforms such as Nexo and BlockFi.

In contrast to a DeFi platform, a CeFi crypto lending platform has a centralized organization with a legal entity backing it and managing the loan platform.

Cryptocurrency staking and lending offer opportunities to make money from your idle assets but in different ways.

 is the process of “locking up” a cryptocurrency asset to serve as a validator in a decentralized network. Validators maintain the security, integrity, and continuity of the network. The network encourages stakers (or validators) by rewarding them with new coins.

On the other hand, cryptocurrency lending pays interest as a reward for allowing the provider (or other users on the platform) to use your crypto assets.

While staking, on average, pays a lower return, it offers more security. Crypto lending typically pays higher returns, but the market is volatile, and rates change quickly.

Unlike traditional bank lending and CeFi crypto lending, Defi lending doesn’t rely on a central authority to oversee and enforce the loan’s terms and conditions. Instead, it relies on 

. Users can stake their crypto assets on the platform for lending. A borrower can directly borrow from the DeFi platform through P2P (peer-to-peer) lending, without credit checks. 

Getting a DeFi crypto loan is hassle-free. All you have to do is log on to your decentralized crypto lending platform, apply for the loan, and send your crypto collateral to a specified wallet. You don’t have to provide your personal information. You don’t need to worry about your credit score or any other documentation requirement. The most critical factor is the value of the crypto you’re offering as collateral and how large a loan it can get you.

That brings us to the loan-to-value (LTV) ratio. 

The loan-to-value ratio is precisely that: the ratio between the loan value and the collateral value. Let’s say you’re taking a $400 loan, and the LTV is 40%. In this case, you would need to put up $1,000 worth of crypto as collateral for a $400 loan, since $400 is 40% of $1,000. As compared to traditional finance, the LTVs for crypto lending or crypto loans, in general, is low due to the volatile nature of cryptocurrencies. For example, BlockFi’s LTV value goes to a maximum of 50% only. This may be a pass for investors, users who prefer to get bigger loans can benefit from the low LTV. As it helps minimize the risks of triggering a margin call. 

DeFi lending comes with a lending rate, which is the cost of borrowing. DeFi lending interest rates vary depending on the lending platforms, amounts, and the terms and conditions of the loan. DeFi lending platforms offer either fixed or floating interest rates.

A fixed interest rate means that you’ll pay a fixed (constant) interest rate throughout the loan tenor. In contrast, a floating interest rate varies according to the market — which means the rate can rise or fall at any time. When borrowing, fixed rates are typically higher than floating rates. Although floating rates can be lower, they may also shoot up at any time. This means that you have no way to know when, or how high, they’ll increase. 

Motivated by the dramatic increase in Bitcoin’s (and other cryptocurrencies’) prices, many investors aim to hold their positions and profit from an expected long-term market price increase. However, this buy-and-hold strategy, known as HODLing, throws up a challenge. What do you do when most of your assets are tied up in cryptocurrency — but you need physical cash?

Luckily, cryptocurrency lending solves this problem because you can hold your crypto assets and still spend fiat currencies. Cryptocurrency investors can borrow money against their holdings or lend their crypto in return for interest. Investors can also let their assets work for them to generate passive income.

As a lender, your cryptocurrency assets don’t just lie around in a wallet; they work and earn passive income for you. Here is why you should lend your crypto.

Cryptocurrency lending can provide returns without you having to sell any of your assets. Some exchanges currently offer annual percentage yields (APYs) as high as 25% to borrow your cryptocurrency. 

Sounds fantastic, right? Compare this with the best-yielding savings accounts in the U.S., which pay a paltry 0.55% average.

While you may lend any cryptocurrency you want, lending stablecoins allows you to grow your assets without the various risk associated with crypto. Stablecoins are cryptocurrencies that are designed to match the value of a real-world currency. For example, USDT is pegged to the US dollar.

The stability afforded by stablecoins also means you know how much you’ll earn from lending your crypto.

While crypto lending offers significant upside and lets your assets work for you, it’s not entirely without risks. 

Cryptocurrencies typically experience wide price swings. As a borrower, your collateral is subject to volatility risk because the platform can liquidate some of your collateral due to drops in market value. If you don’t respond to a margin call by adding more collateral, the platform will liquidate your crypto instantly to restore the LTV ratio of the loan to the agreed-upon level.

DeFi crypto lending platforms use smart contracts to manage your cryptocurrency lending transactions. Unlike CeFi platforms, no humans are involved in the operations. This means you don’t have anyone to rely on if the smart contract fails and you lose your cryptocurrency. Smart contracts and the functions they control can also be hacked or suffer security bugs.

Cryptocurrencies are a new asset class, and the regulations guiding them are still unclear. Lawmakers can decide to introduce new laws regarding legality or taxation, which may or may not be to your advantage.

You can speak to tax consultants in your jurisdiction for guidance to minimize this risk.

Again, DeFi providers don’t have any legal entity behind their platforms, and they operate without a license. This provides a unique problem from a legal perspective, as you don’t have anyone to sue when things go wrong. It also means investors don’t know how regulations might affect them in the future.

CeFi crypto lending platforms use the cryptocurrencies they receive from savers and borrowers to make money. They lend the crypto to counterparties — hedge funds, cryptocurrency exchanges, and other institutional investors. This creates counterparty risk because the counterparties to these transactions could fail to return the asset, making your provider insolvent. 

Investors on these platforms don’t know the risks their providers take with these transactions. In addition, unlike with traditional bank savings products, regulators such as the Federal Deposit Insurance Corporation (FDIC) in the U.S. don’t protect your cryptocurrency investments.

DeFi platforms only lend directly to borrowers on their platforms. They do not lend to third parties. This eliminates counterparty risk because collateralization is built into the smart contract. 

Lending cryptocurrency gives you the benefit of holding on to long-term investment performance while earning additional money passively. Loans are over-collateralized, and even if a borrower defaults, you’ll still have access to their cryptocurrency as compensation.

Cryptocurrency lending platforms offer high-interest rates, paid out weekly in some cases. Fiat and stablecoins earn the highest rates — up to 12.7% APY. Other major cryptocurrencies, like BTC and ETH, typically command rates as high as 6%. This is far higher than traditional banking interest rates.

Among the decentralized lending platforms, 

remain top with one of the highest TVL within the platform.

Image Source: DeFi Pulse — July 9, 2021.

Opportunities: Wide range of loan options and flash loans.

 allows borrowers to put up collateral to support the protocol. At the same time, their contribution is represented in aTokens. On the flip side, flash loans offer fixed interest loan rates.

Opportunities: Higher LTV rates and lower liquidation threshold

 allows lenders to earn interest by supporting the protocol. The amount of digital assets a user supplies is represented by cTokens. The tokens can typically be used to keep track of the fund’s loan as collateral and the interest earned. Interestingly, Compound only liquidates 50% of the under-collateralized loan, and the penalties come at a fixed rate.

 allow lending crypto to yourself. The Maker Vault is open for anyone to mint DAI by locking up your digital assets as collateral and paying back the loan based on the predetermined contract. Maker offers one of the highest 75% LTV rates for crypto loans.

Decentralized finance or DeFi is one of the most disruptive uses of nascent blockchain technology. By using self-executing smart contracts, DeFi replaces traditional institutions with platforms where users can borrow and lend money directly to each other, earning fees and interest in the process. While DeFi offers new opportunities to make money, it also improves the existing financial system by providing more trust, transparency, and efficiency. Still, always do your own research before lending crypto.

Explained: What Are Crypto Lending and Loans in DeFi?

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