SALT Stabilization: How it Works

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I’ve Been Stabilized. What’s Next?

When your Loan-to-Value ratio (LTV) exceeds 90.91%, we stabilize your loan by converting all of your volatile assets into stablecoin (USDC).

At this point, you will notice that your USDC wallet reflects the total US Dollar value of your combined portfolio. Each collateral wallet balance will show $0. Don’t panic!

How Do I Convert Back to My Original Assets?

To get your original assets back, you will need to manage your LTV and restore the health of your loan to a safe state (83.33% LTV or lower). To do this, follow these steps.

  1. Navigate to the Loan Status page or click “Manage LTV” in the notification module on the dashboard.
Image for post 2. Manage your LTV by either depositing more crypto or making a one-time payment in the Manage LTV Module. Image for post

3. We recommend curing your LTV to a healthy state (<70%), but as long as you have managed it to 83.3% or below, you will be eligible to convert.

4. Navigate back to the Loan Status Page. You will see that your LTV has dropped, but you are still being held in Stabilization Mode.

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5. In the Manage LTV module, you will notice that you are now eligible to convert. Click “Convert Now” to convert back to your original assets or to a mix of any assets we accept as collateral.

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6. The convert tool will default to the percentages of your original collateral mix. You may edit this and convert back to a different collateral mix if you’d like.

7. Click “Next” to review the details of your conversion and then click “Convert Now” to confirm. Once confirmed, you will have successfully reverted back to your asset mix of choice.

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Still have questions about stabilization?

Please call our support team at +1 (720) 575–2272.

How to protect your crypto-backed loan during global uncertainty

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We at SALT want to take a moment to address the market volatility and global uncertainty stemming from COVID-19. We understand this level of uncertainty can be stressful and want to reaffirm that we’re taking the necessary steps to keep our employees and your assets safe.

Even as SALT employees have been asked to work from home for the foreseeable future, our support team will remain available 24/7. We’ve implemented our contingency plan for instances like this to ensure there will be no lapses in our customer service.

While we cannot predict what the market will do, we want to ensure you’re aware of the actions you can take NOW to protect your loan:

  • Deposit additional collateral — by depositing additional collateral now, you can lower your loan-to-value ratio (LTV) so that your loan and your collateral are better positioned to withstand a large dip in the market.
  • Add a stable cryptoasset — by adding stable assets like USDC, TUSD, or PAX or by adding gold-backed PAXG as collateral, you can offset market volatility and make your loan less susceptible to downward trends.
  • Make an additional payment — by paying down an additional amount on your loan, you can bring your LTV down to help reduce risk of liquidation.
  • Turn on notifications — if you have not already done so, we strongly encourage you to log into your account, go to your notification settings and turn on all notifications. Then log into your account via our mobile app to activate push notifications. This will help you stay up to date on the health of your loan in real time so that you can take immediate action as needed.

Taking any of the above steps will help protect your loan against market volatility. However, in the event of a severe market downturn like the one that took place on March 12, 2020, we want you to know your options for quickly restoring the health of your loan. Our blog post on what to expect when your collateral is on the decline offers additional details on how to manage your loan during a market downturn.*

Should you run into any issues please contact [email protected] or [email protected] and one of our team members will assist you. We’re here for you and happy to help.

And remember, in the midst of this global pandemic, your own health and safety should be your top priority. Here are some tips from the Centers for Disease Control and Prevention (CDC) on:

  1. How to prevent: https://www.cdc.gov/coronavirus/2019-ncov/about/prevention.html
  2. What to do if you feel sick: https://www.cdc.gov/coronavirus/2019-ncov/about/steps-When-sick.html
  3. Prepare yourself: https://www.cdc.gov/coronavirus/2019-ncov/protect/prepare.html

*This content is meant to educate and inform but should not be taken as financial or investment advice. Trading and investing in cryptocurrencies (also called digital or virtual currencies, cryptoassets, altcoins and so on) involves substantial risk of loss and is not suitable for every investor.

What to Expect When the Value of Your Collateral is on the Decline

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Your collateral is what protects your loan. It’s why SALT doesn’t need to perform income checks or credit checks when issuing a loan. But cryptocurrencies are volatile, so what happens if the value of your collateral begins to fall? Declining collateral value negatively impacts your Loan-to Value-Ratio (LTV) — that is the amount of outstanding principal still owed on your loan divided by the value of your underlying collateral: Outstanding Principal / Value of Collateral. LTV is the key metric SALT uses to determine the health of a loan. The lower the LTV, the healthier the loan. If the value of your collateral goes up, your LTV goes down. If the value of your collateral goes down, your LTV goes up. It’s that simple.

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Choosing your Loan-to-Value (LTV)

When choosing your LTV, the most important consideration is your risk tolerance. We offer starting LTV options of 30%, 40%, 50%, 60%, and 70%. If you go with a 30% LTV, you are choosing the safest level of overcollateralization, or cushion. With a 70% LTV, you won’t have to deposit as much crypto to begin with, but you’ll have the least amount of cushion. The higher the starting LTV, the higher the risk. Choose the LTV option that’s right for you.

What can you expect from us when your collateral declines in value and your LTV begins to rise? Lots of notifications.

If your collateral continues to go down in value, your LTV will steadily climb. As your LTV crosses certain critical thresholds (75%, 83%, 88%, and 90.91% as of the time of this writing) SALT’s robust monitoring and notification technology kicks in to help protect your loan.

  • At 75%, we give you a heads up, letting you know to monitor your loan more closely given your collateral is declining in value.
  • At 83%, we inform you that things are not looking so good, and you may want to consider paying back some of the loan or depositing extra collateral.
  • At 88%, we issue a final warning to let you know that if you don’t pay back some of the loan or deposit more collateral, you run a high risk of having your assets liquidated.
  • At 90.91%, SALT is contractually obligated to liquidate a portion of your collateral in order to prevent the lender from losing their investment.

After all, lenders wouldn’t be willing to lend the money in the first place if SALT couldn’t guarantee its safety.

How you respond to a rising LTV and warning notifications is up to you. Here are the current options:

  1. Pay back a portion of the loan — You can make a payment in USD via wire or ACH, or you can make a payment using a stablecoin instead. SALT currently accepts PAX, USDC and TUSD. With this option, you are choosing to lower your LTV by paying down the principal on your loan.
  2. Deposit more collateral — You can quickly and easily deposit additional collateral (it can be the same collateral your loan is backed by or a different collateral type that we offer). With this option, you are choosing to lower your LTV by increasing the total value of the underlying collateral.
  3. Do nothing — You can choose to ignore the warnings. If your collateral continues to decline in value, SALT may eventually be forced to liquidate a portion of your assets on the open market.

We’ve done the math to show you how each of these options impacts your assets, remaining principal, and required payment.

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Based on the above calculations, if you want to avoid any loss of assets, it’s best to respond as quickly as possible with options one or two. Otherwise, option three is available if that’s what you prefer. Either way it’s important to think through the options and know where you stand before your LTV crosses our liquidation threshold.

Keep tabs on your loan health from anywhere via the real-time LTV widget on your web dashboard or by logging into your account through our mobile app.

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It’s on us to monitor your loan health and keep you updated. It’s on you to take action (or not take action) when your collateral value is on the decline.

Crypto — Coming Into Its Own

By Jenny Shaver 

A look at indicators of industry maturity and assessing the right kind of investment risk.

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(This article is adapted from a keynote speech delivered at the April, 2019 Crypto Invest Summit.)

I often get asked, whether it’s by former colleagues, or people I meet at social events, or even my dad, “Why would people invest in crypto? It seems risky.”

Depending on your investment strategy, sure, it’s risky. But…it’s a different kind of risky than it was even two years ago.

So, what’s changed?

Crypto asset performance isn’t correlated to any other asset class. It doesn’t move with fiat inflation or commodities prices. It’s not tied to the performance of a company like a security. That inherently creates risk but also opportunity for significant gain. This is a risk that we as an industry weather and accept.

The perceived risk my dad is referencing has less to do with crypto asset volatility and more to do with the perception that the crypto industry reflects the lawless, undisciplined behavior and unbridled speculation akin to the caricature of the wild west.

This perception is inaccurate.

I was having a conversation with a colleague about this very topic and he said,

“Our industry isn’t in a state of chaos like The Wild West. Our industry is more analogous to The Space Race.”

John F. Kennedy said of The Space Race, “We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard.”

Blockchain technology attempts to solve previously unsolvable problems. The complexity of the technology and the nascent nature of the regulatory framework, requires new and emerging expertise. It requires risk takers to set new precedents.

This pursuit has resulted in a pouring in of talent and capital which have given rise to increasing competition and meaningful industry advances. We are seeing this manifest via several indicators of industry maturity.

Broader Adoption

Despite the crypto winter, or bear market, or whatever we want to call 2018, we saw a nearly doubling of the amount of individuals who hold crypto assets. A survey published by Forbes suggests that crypto holders are skewing older and more affluent than previously thought.

UTXO analysis conducted by Delphi Digital suggests that most crypto holders who held a position longer than five years largely sold off their holdings, partly contributing to the downturn, but clearing the way for new investors seeking engagement with new types of products.

From an institutional perspective, traditional financial services and crypto financial services are converging. We are seeing validation of crypto assets in traditional companies incorporating crypto services or blockchain infrastructure.

Institutional adoption also extends to partnerships and service providers for crypto companies. Just in the past 12 months, I have seen an increased willingness of vendors and service providers to work with crypto companies. Companies who were saying “no” to providing services for us 12 months ago, are now actively trying to work with us.

Compliance

US-based crypto companies have made significant strides to create risk and compliance programs that are comparable to traditional financial institutions.

This includes a robust KYC/AML program, customer data protection standards, SOC compliance, compliance monitoring of blockchain addresses, and dedicated resources to oversee compliance programs.

As our industry attempts to navigate its purpose of removing barriers for transferring value, even regulatory barriers, compliance programs at this stage of our industry maturity, are a necessary step for broader adoption and mitigation of regulatory risk.

Insurance

Insurance has been a hot topic as of late because it’s a relatively new advancement in our industry. But it’s meaningful.

The fact that insurance providers are willing to underwrite affordable insurance policies for crypto-specific operations is a strong indicator that we as an industry are demonstrating the safety of holding crypto assets.

I urge investors to ask critical questions about the specifics of insurance programs — the coverage amount, incidents covered, and the claims and payout process and timeline.

The good news is that as our industry continues to prove itself, the competition amongst insurance underwriters will increase, which, in turn, will drive down costs.

Market Data Integrity

Our industry is dealing with our own data integrity issues just like any other high volume, high velocity industry.

Recognizing these gaps and the dependence on reliable market data to drive participation, there has been a surge of data research companies dedicated to improving the quality of market data.

The recent incident of BitWise calling out CoinMarketCap for overstating trading volumes, is a great example of our industry’s maturity in this area.

This is significant not just because companies like BitWise are expending resources to conduct due diligence on our industry’s leading data providers, but also because of CoinMarketCap’s acceptance of accountability to address the issue and improve their product.

It demonstrates that we are holding ourselves to a higher standard, and that investors will have increasingly accurate sources of information to make informed decisions.

Response to Scalability Challenges

JPMorgan announced earlier this year that it is investing in its Quorum blockchain infrastructure to facilitate payments in a more efficient manner using its dollar-backed JPM Coin.

It’s currently being piloted with a few institutional clients but is promising to revolutionize their payment processing.

To realize this potential will require blockchains to dependably support concurrent transactions at a scale that is not yet possible, or at least not yet largely practiced and tested.

Our industry is investing significant resources to solve this problem, and promising solutions are surfacing.

A second layer protocol solution, Lightning Network, is perhaps the most exciting advancement in the race for scalability.

For crypto to deliver on its potential of revolutionizing the transfer of value on a global scale, it must rise to meet the challenges of scale.

We’re working on it.

More Sophisticated Investment Products

What I see as the most exciting indicator of market maturity is the increasing diversification of product offerings.

Interest-bearing accounts are seeing promising early performance, futures and options are now available on select exchanges, as is trading on margin, and ETFs are on the near-term horizon.

What I have seen is an industry response to the unique nature of crypto assets and the needs of crypto holders. In crypto lending, for example, simply offering a crypto-backed, USD loan, does not address all market uses cases.

If 2018 has taught us anything it’s that we need products that drive market engagement in both bear and bull markets.

Our industry now offers several ways for investors to participate — directly through investing in crypto assets, less directly by offering fiat capital pipelines for interest-based products, or indirectly through investing in the growth of crypto companies and projects.

These options are allowing for a wider breadth of investor participation with varying risk appetites.

I return to the question, “Is crypto investing risky?”

When we empower a company like Charles Schwab to manage our wealth portfolio, we know there is some risk in the investment strategy but we don’t worry about them losing or mismanaging our money.

There are enough responsible companies in the crypto industry that can provide the same amount of assurance about the handling of your crypto assets. I encourage investors to seek out reputable companies and ask tough questions about their operations due diligence. Watch how companies respond to industry incidents like a hack or key compromise event. Our industry is still young and we’re still learning our vulnerabilities. The good companies will have a disaster recovery procedure that cure customer losses.

We have seen what happens when more resources are deployed to our industry. The result is more talent, innovation, and increasing sophistication that results in better products and better opportunities for investors.

Everyone wins.

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of SALT Lending.