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crypto-basics

What is CeFi?

Matthew Levy
Matthew Levy

CeFi stands for centralized finance, which looks to incorporate certain features of the traditional financial system into the decentralized finance ecosystem.

What does CeFi offer?

Crypto assets have been a speculative investment for most investors, and the concept of decentralization has been the theme of such technology. With time, there have been efforts to bring some of the features of the current banking system into the DeFi (Decentralized finance) space. In CeFi, cryptos holdings can earn interest, and these assets can also be borrowed and lent.¹

It should be noted that the CeFi structure in crypto is not eligible for the Federal Deposit Insurance Corporation (FDIC) or Securities Investor Protection Corporation (SIPC).¹

Example

Rex has accumulated $10 million worth of crypto assets in his wallet. He doesn't want to sell his holdings but he needs a loan for personal reasons. Since he does not want to sell his holdings, he can borrow against the crypto assets. Generally, the loan amount is capped to a certain percentage of the total value of his assets.

Source

  1. What is CeFi? Coinbase.

Please note that this article is for general informational purposes only. The example above is for illustrative purposes only. The views and opinions expressed are those of the author and do not reflect or represent the views and opinions of Alpaca. Alpaca does not recommend any specific cryptocurrencies.

Cryptocurrency is highly speculative in nature, involves a high degree of risks, such as volatile market price swings, market manipulation, flash crashes, and cybersecurity risks. Cryptocurrency is not regulated or is lightly regulated in most countries. Cryptocurrency trading can lead to large, immediate and permanent loss of financial value. You should have appropriate knowledge and experience before engaging in cryptocurrency trading. For additional information, please click here.

Please see alpaca.markets and Alpaca’s Disclosure Library for more information.

Cryptocurrency services are made available by Alpaca Crypto LLC ("Alpaca Crypto"), a FinCEN registered money services business (NMLS # 2160858), and a wholly-owned subsidiary of AlpacaDB, Inc. Alpaca Crypto is not a member of SIPC or FINRA. Cryptocurrencies are not stocks and your cryptocurrency investments are not protected by either FDIC or SIPC. Depending on your location, cryptocurrency services may be provided by West Realm Shires Services, Inc., d/b/a FTX US (NMLS #1957771).

This is not an offer, solicitation of an offer, or advice to buy or sell cryptocurrencies, or open a cryptocurrency account in any jurisdiction where Alpaca Crypto, or FTX US respectively, are not registered or licensed, as applicable.

crypto-basics

Matthew Levy

Matthew Levy is a Chartered Financial Analyst (CFA) designation holder, a former portfolio manager for $600+ MM in assets, and started his own business writing financial analysis for clients worldwide