Antoni Trenchev, CEO of Nexo, a lender that allows users to borrow against crypto assets, has a view about how millennials spend a loan, as well as their mindset when borrowing. He talked with CCN about what he has discovered.
Lenders like Nexo, SALT, and others allow clients to borrow against their digital assets. This allows them to spend without cashing out crypto, which would make them liable for tax on it as a capital gain. They also risk missing out on bullish upswings if they sell it.
This type of lending system for users does present the challenge of market volatility. For example, a Bitcoin loan offering $0.50 on the dollar (or 2:1 collateral) allows the client to borrow $500 for $1,000 worth of Bitcoin. If the price of Bitcoin drops, the user will need to back up their loan with more BTC collateral or risk the loan being liquidated, losing their staked BTC.
However, Trenchev says crypto users are surprisingly on point regarding their finances: “We got lucky, I must say. If we launched in January when Bitcoin was at $19,000, we would have experienced quite a lot of liquidations. We launched on May 1st, and then Bitcoin was already trailing much lower, so we started from a low point. You wouldn’t expect the clients in the crypto space to be so financially savvy, but they are. They structure their finances very well, they know exactly why they are borrowing, how much they should be borrowing, and with us, we’re under-leveraged by giving 50 cents on the dollar. We had very few liquidations, yes we had some, but nothing dramatic and nothing that would affect us as a company and I would like to think that 98% of our clients have not been hurt by the recent bear market.”
What do millennials spend loans on?
Trenchev revealed the answer to this: “We see a lot of people borrow to go on vacation, and I think this has to do with the whole millennial mindset. If you observe the retail market like clothing, consumer goods — it’s in a downtrend, the exact opposite is true with travelling, getting Ubers and AirBnBs, etc, so people are looking for real-life experiences. We see a lot of people borrow off of digital assets to buy real-life things, which is almost paradoxical!”