Why do digital asset holders need to be aware of haircut risks?

2 answers

• Nov 26, 2021 · 3 years ago
  Digital asset holders should be aware of haircut risks to protect their investments and make informed decisions. Haircut risks can arise in various scenarios, such as using digital assets as collateral for loans or participating in margin trading. When an asset is used as collateral, lenders or exchanges may apply a haircut, which means that a percentage of the asset's value is deducted to account for potential market fluctuations or default risk. By being aware of haircut risks, holders can assess the potential impact on their investments and adjust their strategies accordingly. It is important to stay updated on the haircut policies of different platforms and understand the potential risks involved before engaging in any transactions.
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• Nov 26, 2021 · 3 years ago
  Haircut risks are an important consideration for digital asset holders. When using digital assets as collateral, there is a risk of losing a portion of their value due to haircuts. This risk is particularly relevant in the context of borrowing or margin trading, where lenders or exchanges may require collateral to mitigate potential losses. By being aware of haircut risks, digital asset holders can make informed decisions about the amount of collateral to provide and assess the potential impact on their investments. It's essential to stay updated on the haircut policies of different platforms and assess the associated risks before engaging in any transactions.
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