![]() The system usually works well enough when markets are going up or are roughly steady, though individual investors who make bad bets or get in over their heads can suffer. ![]() That means that if the value of the collateral drops, the broker will call for the investor to either post more collateral or close the position and repay the loan. The collateral requirement is defined as a percentage of the loan. The lenders, usually brokers, require that collateral, usually in the form of other stocks, be posted to offset the risk of the trade going sour. In traditional markets, trading with borrowed money is called borrowing on the margin. That pattern, driven by so-called margin calls, has come to cryptocurrency markets in a big way since prices began to slump broadly - with some additional crypto-only twists. (Bloomberg) - It’s a vicious circle long familiar to those in traditional finance: trades made with borrowed money coming apart when the value of their collateral put up against the loans drops, forcing liquidations that in turn push prices down further.
0 Comments
Leave a Reply. |
Details
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |