Assessing the variability of crypto collateral assets in secured lending on the blockchain

The objective is to assess the variability of collateral crypto-assets used in secured lending on the blockchain. Using the coefficient of variation, the study estimates volatility of selected assets and implied risk intensity for both borrowers and lenders on blockchain-based lending. The coefficie...

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Bibliographic Details
Published in:Development southern Africa (Sandton, South Africa) South Africa), 2022-11, Vol.39 (6), p.830-840
Main Authors: Masilela, Jane Jabulile, van Wyk, Roscoe Bertrum, Marwa, Nyankomo
Format: Article
Language:English
Subjects:
Assets
blockchain
crypto-currency
Digital currencies
digital finance
Dominance
financial inclusion
Financial institutions
Innovative finance
Markets
secured lending
Simplicity
Variability
Volatility
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Summary:The objective is to assess the variability of collateral crypto-assets used in secured lending on the blockchain. Using the coefficient of variation, the study estimates volatility of selected assets and implied risk intensity for both borrowers and lenders on blockchain-based lending. The coefficient of variation model was adopted by testing volatility. The model produced a number of key empirical observations from January 2017 to December 2018 reflecting market swings resulting in volatility, despite its simplicity, using Bitcoin, Ethereum and Ripple crypto-assets. The results of the study provide clarity on the crypto-assets bullish and bearish markets and whether there is a correlation between crypto-assets and Bitcoin market dominance. The recommendations include that financial institutions should de-risk their investment, participate in the crypto-currency domain and ensure financial inclusion; concepts of traditional asset-backed lending could be implemented by looking at 50 percent loan-to-value ratio.
ISSN:0376-835X
1470-3637
DOI:10.1080/0376835X.2021.1906630