The major Bitcoin exchanges, such as Bitfinex or Poloniex, offer their users the possibility to lend their own funds to daytraders in the form of short-term loans in addition to the actual trading of Bitcoins, Altcoins and fiat currencies. The traders use the borrowed funds for so-called margin trading and the lender receives interest for the transfer of the capital. At this point Coinlend offers a free service that completely automates the lending process, optimizes the interest income and takes a lot of time and work off the user.
To get an introduction to the topic, it is useful to understand how margin trading works:
- For example, margin traders bet on rising prices of crypto-currencies in so-called leveraged transactions. For this, the traders often need additional borrowed capital to maximize their profit opportunities.
- This capital can be provided by any user of the exchange within the framework of P2P margin funding and receive a corresponding interest rate.
- In the case of Bitcoin lending, the average interest rate over the last 12 months has been around 25%, which makes lending in crypto currencies very attractive for any investor, especially in view of the compound interest effect.
Margin trading is offered on various crypto exchanges
Coinlend currently supports the two largest margin funding exchanges Bitfinex and Poloniex. Further trading places will follow shortly. Currently, the integration of the largest Japanese exchange, Quoniex, is being beta tested.
To lend coins, the user only has to transfer the coins to be lent to the (funding) wallet of the respective exchange and can immediately start margin lending. And this is where the service of Coinlend comes into play.
The manual lending of coins on the exchanges is very laborious and time-consuming. The user interface is unclear and hardly understandable for beginners. In addition, the trading transactions often have a very short term of two days and can be repaid prematurely at any time by the margin trader. Thus, the coins accumulate in the wallet without interest until the user manually lends them again. To get an overview of bitcoin lending sites, visit this page.
For this reason Coinlend was created. Once set up, the artificial intelligence behind Coinlend automates the creation of the credits and optimises the user’s interest income – and all this free of charge. Coinlend is currently financed by donations from users. After entering the API key of the desired stock exchange and defining the basic conditions (such as minimum interest rate, term, etc.), the bot programmed by Coinlend starts its work and lends the user’s coins fully automatically – at the best possible interest rate and completely free of charge. Coinlend offers extensive statistics and evaluations on current credits and future developments. Setting up the bot is quick and easy, and there is also a beginner-friendly step-by-step guide for each exchange. And if there are still difficulties in setting up the API key, Coinlend customer support will help you promptly.
What are the risks for the user?
Basically the risk is low. The margin trader must deposit a security with the stock exchange. As soon as his leveraged position runs against him and the collateral is exhausted, the position is closed and the lender is credited with his coins plus the interest accrued up to that point. Nevertheless, the user must of course entrust his capital to a stock exchange, which involves a certain risk, even though the major stock exchanges have been operating on the market for years.
Nor is it possible for coins to be misused by coinlend or the borrower, as the required access rights (API keys) only allow the coins to be lent, but not sold, paid out or similar actions. Neither by the margin trader nor by coinlend. If a user enters incorrect rights, e.g. access rights that are too extensive, the API key is automatically recognized as invalid by Coinlend and discarded.
Conclusion: In summary, margin funding is a good way to increase Bitcoin, Altcoins or US dollars at low risk. Those who are not afraid of a little risk can achieve very good returns. And here the service provided free of charge by Coinlend provides excellent services, saving the user a lot of time and investing the coins in the best possible way. It is easy and comfortable to use, very clear and offers a wide range of statistics