SAN FRANCISCO, CA / ACCESSWIRE / April 8, 2021 / Kava announces today that it enables institutions to earn +45% APR on Bitcoin holdings without counterparty risk. The Kava base-layer infrastructure has been optimized. Kava Labs released the Kava 5 upgrade to the public including its borrow-side functionality.
In Brief
- Kava brings a 45% APR to institutional Bitcoin holders
- This high APR has no counterparty risk
- Institutional-level DeFi is now widely accessible
Bitcoin and others have enabled users to take control of funds removing the need for banks and middlemen. Now users can custody their digital assets, store value, and make payments without the fees.
However, with great power comes great responsibility. The old centralized way is being a recipient - you get your checking and savings accounts, but you can't custody your assets.
Institutional investors have been paying increasing attention to Bitcoin in recent months. The growing number of publicly traded companies having a Bitcoin treasury is just one such indicator. Kava's recent protocol upgrade lets these companies take out loans on their assets.
Institutional Investors Flock To Bitcoin
The past twelve months have been intriguing as far as Bitcoin is concerned. Besides the price hype, the big news is how more institutional investors seek exposure to the world's leading cryptocurrency. Rather than spending money on futures contracts, these companies purchase Bitcoin as part of their Treasury. Several companies have been outspoken about these purchases, including MicroStrategy, Tesla, and Meitu.
To some, this approach may seem risky. Bitcoin remains a volatile asset that can undergo wild price fluctuations. However, every company creating a Bitcoin Treasury over the past few months is currently in profit. Though uncertain, this approach is working out for Bitcoin holders.
Now that these institutional players are invested in Bitcoin, one has to wonder what comes next. Will they sell when the price is at the next all-time high, or keep adding more BTC to their Treasury? Figuring out this "retention" angle will prove necessary if this industry is to keep on growing globally. The market is looking for a strategy to "HODL" harder and money markets are one solution for these institutions.
Institutional-Grade Borrowing
Sophisticated institutions are using their current Bitcoin holdings as collateral for loans. As part of the Kava 5 upgrade, the HARD Protocol received an update to Version 2 fully competing the whitepaper of the project. This upgrade provides borrowing with variable interest rates and HARD token distribution to suppliers and borrowers alike.
Assuming companies like Tesla want to put their BTC to work, they can do so through the Kava lending app and the HARD Protocol app. Any financial institution can earn 45% on their current BTC holdings without counterparty risk. As Tesla owns $1.5 billion worth of Bitcoin - or an estimated 48,000 BTC - they can earn up to 21,600 BTC with a 12 month lock-up period. Kava provides a significant passive income stream that institutions can explore by turning their Bitcoin into a cash-flowing asset.
The option of lending and borrowing is an increasingly popular aspect of decentralized finance. To date, Bitcoin's role in DeFi remains minimal, as few protocols support the world's leading currency in its native form. More often than not, users need to convert their holdings to a tokenized or wrapped version and spend money to do so. Protocols that support Bitcoin natively can benefit from the growing interest in cryptocurrencies by institutional investors.
Convincing the institutions that hold Bitcoin to explore DeFi options will be a tall order. Although a 45% return with no counterparty risk is appealing, it remains unclear how many companies prefer this option because the risk with DeFi is there's no counterparty to sue when things go wrong.
Closing Thoughts
As more Bitcoin-oriented DeFi solutions come to market, the landscape will grow more competitive and compelling. Catering to institutional-grade players is the next order of business, as big money is pouring into Bitcoin.
Keeping that momentum going will require compelling options, either through decentralized finance or otherwise. The coming months may prove crucial in this regard, as these institutional players may not sit around for too long.
"As more enterprises and financial institutions adopt bitcoin and crypto currencies, the more valuable the Kava DeFi platform will become as it enables this new wave of financially minded users with a way to finally put their assets to work and make Bitcoin and other crypto into a cash flowing asset on their balance sheets." - Brian Kerr, CEO of Kava Labs
About Kava
Kava Labs is focused on democratizing financial services and making them openly accessible to anyone, anywhere in the world. In 2019 Kava Labs built the Kava blockchain, a foundational platform designed to provide the most safe, secure, and reliable experience for accessing Decentralized Financial (DeFi) apps and services. Today that platform manages over $1B in assets on behalf of users and is growing rapidly.
HARD Protocol is the world's first multi-chain money market for cryptocurrencies enabling users to borrow, lend, and earn interest on the assets. HARD Protocol is built on the Kava platform leveraging its safe, secure, and reliable DeFi infrastructure to deliver its money market product globally to anyone, anywhere.
HARD Protocol is the world's first multi-chain money market for cryptocurrencies enabling users to borrow, lend, and earn interest on the assets. HARD Protocol is built on the Kava platform leveraging its safe, secure, and reliable DeFi infrastructure to deliver its money market product globally to anyone, anywhere.
More details about HARD Protocol can be found at https://www.kava.io/hard-protocol
Media Contact:
Company: Kava Labs
Contact: Sarah Austin
E-Mail: Sarah@kava.io
Website: https://www.kava.io/
SOURCE: Kava Labs
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