New Partnership Announcement: Coinbase and Morpho
Coinbase has recently announced a new partnership with money market Morpho on Jan. 16. This collaboration aims to offer on-chain USD Coin (USDC) loans backed by Bitcoin (BTC).
Loan Details
- Users can borrow USDC by pledging Bitcoin as collateral.
- Loans are processed through the layer-2 blockchain Base.
- Collateral is automatically converted to Coinbase Wrapped Bitcoin (cbBTC) on a 1:1 basis and transferred to Morpho.
- Borrowers can access up to $100,000 in USDC.
- Interest rates are determined dynamically by Morpho’s market-driven mechanism.
Benefits of On-Chain Loans
- Flexibility with no fixed repayment schedule.
- Users must monitor their loan-to-value ratio to avoid liquidation in case the collateral’s value drops.
DeFi Expansion
This initiative by Coinbase highlights the firm’s focus on decentralized finance (DeFi) tools for its expansion plans. The new service is positioned as a way to bring traditional financial tools into the crypto market.
Tax-Efficient Alternative
- Users can convert borrowed USDC to US dollars for free.
- The service offers a tax-efficient alternative to selling Bitcoin, potentially helping users defer capital gains or losses.
Market Trends
- cbBTC has surpassed $2.1 billion in supply since its launch.
- Wrapped Bitcoin (WBTC) experienced a 13.4% decrease in supply over the same period.
Authors
Gino Matos – Reporter at CryptoSlate
Assad Jafri – Editor & Reporter at CryptoSlate