The Evolution of the Crypto Market and its Role in Asset-Based Lending

Originally published in ABF Journal

Cryptocurrency is a disruptor. Not only has it changed the way we conduct business, but it has changed the way we think. The most obvious manifestation of how cryptocurrency has disrupted our thought patterns is in the way we think about money — about who issues it, how to transact with it, how to put it to work and how to keep it safe. It also has changed the way we think about our government, our right to privacy and our financial freedom. What’s less obvious is how cryptocurrencies are disrupting the way we think about and participate in asset-based lending. The advent of Bitcoin catalyzed the creation of a myriad of cryptocurrencies, many of which became viewed as assets, yet at the time, there was no way for crypto investors to unlock the value of these assets without selling them. This is the problem SALT’s founders set out to solve in 2016 and in doing so successfully, made asset-based lending as we once knew it a thing of the past.

Creating a New Asset Class

As Bitcoin began to experience wider adoption following its release in 2009, it became clear that some investors were purchasing crypto to trade on a daily basis while others were choosing to invest long-term, viewing Bitcoin more as an asset than as a spendable currency. As more investors adopted this long position and began to think of cryptocurrencies as an asset class in their own right, the term “HODL” emerged in 2013 on a bitcoin-talk forum and has since become one of the most commonly used words in the crypto vernacular. This HODL culture has grown significantly over the years and has evolved to where investors are buying, selling and trading these assets not only for themselves but on behalf of others. This activity has taken the form of crypto portfolios and crypto funds, which offer access to this new asset class for individuals and allow them to diversify their portfolios while eliminating some of the overhead of learning how to purchase and safely hold cryptoassets. By providing a way to collateralize cryptoassets to secure a cash or stablecoin loan, SALT provides opportunities for individuals, businesses and capital providers to build and preserve wealth.

How to Lend Cryptoassets

As the first-ever crypto-backed lender, SALT has developed the technology and processes required to successfully lend against cryptoassets, giving borrowers a way to unlock the value of these assets without selling them. Take Bitcoin for example. It’s one of many cryptoassets we accept as collateral on our platform, yet it makes up more than 80% of the collateral securing our loan book.

What makes Bitcoin a strong form of collateral? The answer lies in Bitcoin’s combined characteristics. Like gold, Bitcoin is scarce, fungible, divisible, transferable and durable. It is also extremely liquid given it is traded on global exchanges every day. Additionally, as a decentralized asset, Bitcoin is highly secure. All of these properties make Bitcoin both a viable asset and a highly efficient form of collateral that has piqued the interest of some of the largest financial institutions in the world.

One thing to note is Bitcoin’s volatile nature, which can pose challenges specifically for the ABL market. However, SALT’s risk management technology effectively manages this volatility. Our technology includes real-time loan-to-value (LTV) monitoring, margin call and liquidation triggers, real-time notifications and the safekeeping of assets through institutional grade custody solutions. For example, our loan-to-value (LTV) monitoring system tracks the prices of assets 24 hours a day, 365 days a year, providing borrowers with the ability to monitor the health of their loan in real-time. If, during periods of heightened volatility, a borrower’s collateral declines in value and their LTV breaches our margin call threshold, we protect the borrower by issuing a margin call that prompts them to take action to restore the health of their loan. Actions borrowers may take include paying down principal or depositing additional collateral to recalibrate their LTV to an appropriate level (70%). If no action is taken and asset prices continue to decline, SALT has the ability and the right to liquidate collateral assets to preserve lender capital. The overcollateralized nature of our loans combined with our risk management technology and ability to liquidate assets enables us to protect the lender, and as a result, we’ve experienced zero losses of principal to date.

Choosing a Crypto-Backed Lender

SALT’s business model is attractive to crypto investors (e.g. traders and asset managers) and businesses (e.g. mining operations and exchanges) for a few reasons. First, we provide access to liquidity, offering loans ranging from $5,000 to the millions. Typical use cases include businesses seeking working capital to fund operational costs and large capital expenditures, or investors seeking leverage, diversification or risk management. Second, since our model is asset-based and requires overcollateralization, we do not rely on a borrower’s credit profile and can fund loans within 24 to 48 hours, assuming the borrower meets our strict AML/KYC requirements. Third, customers know their assets are safely and securely held with institutional-grade custody providers for the duration of their loan. Fourth, our loan process is straightforward and customizable. We allow borrowers to lend against a single cryptoasset or a portfolio of cryptoassets and offer flexible loan terms, including durations ranging from three to 12 months, LTVs up to 60% for individual loans or up to 70% for business loans, and competitive interest rates ranging from 5% to 12% depending on the borrower’s jurisdiction, loan amount and LTV. While we are no longer the only crypto-backed lender in the world, we are one of the few that incorporate a human element into our business model. Unlike completely automated lenders, SALT offers both phone and online support, and assigns each customer a loan support specialist at the time of loan origination. These human touches positively impact a borrower’s experience with the platform; they know that by choosing SALT, they will always have the option to speak with someone about their financial needs.

The Evolution of the Crypto Market and Tokenization

Since SALT’s founding in 2016, the crypto lending market has grown exponentially. According to a report from Credmark, the crypto lending market reached $8 billion in total lifetime loan originations as of Q4/19 and has since surpassed $10 billion following Q1/20. These numbers not only indicate the growing demand for liquidity among crypto holders but also the growing interest among capital providers to get involved in the crypto market. For example, we’ve witnessed an influx of both crypto native (BitGo Prime and Genesis Capital) and traditional financial institutions (Silvergate) that provide leverage and liquidity vehicles at the institutional level.

Another thing to consider regarding the evolution of the crypto market is that as the world becomes tokenized, the very definition of the term “crypto market” is changing. With the emergence of companies like Paxos and Harbor, we’re beginning to see increased tokenization of real-world assets like gold and real estate. At SALT we already accept Pax Gold (a gold-backed cryptoasset) as collateral on our platform and our vision for the future goes well beyond our current collateral scope.

The Role of Alternative Investments

As crypto becomes more widely accepted, a growing number of people are assessing their own risk profiles and determining the best way for them to participate in the crypto market. For those with lower risk profiles, the market has evolved in recent years to offer individuals or businesses indirect exposure to this new asset class. As previously mentioned, crypto portfolios and crypto funds are part of this evolution along with alternative investment companies like Cadence (portfolio company of Coinbase Ventures). Cadence is a securitization platform for private credit that grants access to exclusive high yield, short term investments traditionally reserved for institutions. In February 2020, we partnered with Cadence to offer prospective investors the opportunity to gain exposure to cash flows associated with a portfolio of underlying loans collateralized by cryptoassets. The first note of $500,000 was oversubscribed in five days and we have since worked with Cadence to issue $2.9 million in notes to investors to date. As more companies like Cadence provide structure, liquidity and indirect exposure to alternative asset classes like crypto, we expect to see even greater demand from investors seeking attractive risk adjusted returns.

Opportunities for Institutional Investors

There’s no doubt cryptocurrency has changed the way we think about asset-based lending. It has formed a new asset class and also has catalyzed the trend of broader tokenization — a trend that will inevitably expand the universe of collateral options and have a meaningful impact on the ABL industry. If you’re a decision maker at an institution and are interested in learning more, email [email protected] to discuss opportunities to build and preserve wealth in this rapidly evolving industry.

May Update from SALT

In case you’re not a subscriber to our newsletter, we want to share some of our favorite highlights from May right here on our blog to help keep you up to date on all things SALT. Image for post

Event Follow-Up with SALT’s CPO

We want to thank everyone who watched & participated in Bitcoin Magazine’s Halving live-stream celebration with us last month. To address some of the questions that came up from the event including questions regarding the SALT token, our CPO Rob Odell sat down with one of their team members for a follow-up video. You can learn more about the changes we’ve made to the SALT token from our blog post, New Changes Add Value for SALT Supporters.

Watch the full follow-up video here


Coins vs. Tokens

Ever get tripped up on the differences between coins and tokens? Our latest infographic breaks it down.

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We Want to Hear from You

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We have recently added an option to our “What’s New” feature for you to share your feedback on our content. You can share your thoughts by rating our content and/or leaving a comment.

See what’s new at SALT here.


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Twitter Poll Results: Bitcoin Pizza Day

On Bitcoin Pizza Day we asked our Twitter followers in a poll what they would do with 10,000 bitcoin, and these are the results. You can participate in our next poll by following us on Twitter.

To see the results on Twitter, click here.


Refer a Friend

Get $50 in bitcoin for you & your friend when they take out a crypto-backed loan. To learn how you can refer your friends, check out our blog post Pass the SALT, Grow Your Wallet.


Black Lives Matter

As operations at SALT carry on, it is not lost on us, as a company nor as individuals, that Black Americans continue to fight for racial justice. Until racism is eradicated completely, we are committed to hearing, learning from, and supporting our Black customers & communities in this fight for a more inclusive world. As we reflect internally on the immediate changes SALT can make to support this mission, we have proactively chosen to make Juneteenth a company holiday to honor the significance of June 19, 1865.


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Questions about our products and offerings? Contact [email protected]

Introducing “Worth Your SALT,” Discussions with Industry Leaders that are Worth Your Time

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Innovative industries are driven by innovative minds. There’s an array of knowledge within the blockchain ecosystem and here at SALT, we believe highlighting different understandings and perspectives can only facilitate growth within our industry. With this in mind, we’re excited to release our newest video series “Worth Your SALT,” a platform dedicated to interviewing industry leaders and trailblazers currently shaping the way we think about technology. Hosted by SALT Co-Founder Caleb Slade, these segments feature thought-provoking discussions that uncover the stories behind these crypto pioneers and explores their vision for solving problems that aren’t yet fully understood.

In the first episode of “Worth Your SALT” we had the chance to sit down with Shira Frank, Co-Founder of Maiden — an industry-backed lab for universal blockchain education and research — to discuss the importance of humanizing blockchain. Throughout the discussion, Shira tells us about her unique background that has led her to focus on the intersection of ethics/awareness and technology. She leaves us pondering the complex relationship humans have with technology: we constantly think about the ways we’ve shaped and evolved technology, but have we ever truly thought about how it’s shaping and evolving us?

Watch the full-length version to hear more from Shira Frank on the social complexities of advancing technologies.

We’ll be releasing new episodes of “Worth Your SALT” in the coming weeks to highlight perspectives from various areas of the blockchain/crypto industry. Upcoming episodes will feature thought leaders including David Chaum, Jeff Berwick, and Paul Puey, among others.

Missed an episode? You can find the short and full-length versions here. New episodes can also be found on our Twitter and YouTube channels.

The first card that lets you use
your crypto for everyday purchases,
without selling any of it.

The first card that lets you use
your crypto for everyday purchases,
without selling any of it.