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High-risk cryptocurrency loans are rising again, and according to insights from analysts, the growth cannot be considered a positive occurrence for the digital asset space.that high-risk loans have surged to the $5 million region, a level last seen during the crash of many crypto lenders in May/June 2022.High-risk loans are often used to take advantage of arbitrage opportunities in the crypto market.
IntoTheBlock says high-risk loans are those within 5% of liquidation; the assets posted as collateral are very close to their liquidation prices. Analysts insist that the growth of high-risk loans is a significant indicator to monitor in crypto lending protocols because they can contribute to market liquidity issues.According to IntoTheBlock, rapid market plunges can cause the collateral needed to cover loans to become insufficient, leading to bad debt and losses to lenders.
The last time high-risk loans spiked to their current level, roughly a dozen crypto firms, particularly lending platforms, went up in smoke. Entities like Celsius Network, Voyager Digital, Three Arrows Capital, BlockFi, and Babel Finance
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