How to Manage Credit Risk and Interest Rates with Crypto on Credit on Coins.ph

Coins.ph's "Crypto on Credit" feature offers an opportunity to amplify your trading, but it's crucial to understand and manage the associated risks and interest rates. Learn how to minimize risks and optimize your trading strategy on Coins.ph.

Understanding Credit Risk 

Trading with borrowed funds inherently involves risk. With Crypto on Credit, the primary risk is liquidation, which occurs when the value of your collateral is insufficient to cover your outstanding liabilities. To manage this risk, Coins.ph uses a Risk Rate calculation.

• Risk Rate:

This is calculated as Total Credit Wallet Net Assets / Total Liabilities. You can check your account risk on the Portfolio page.

• Liquidation:

A lower Risk Rate signifies a higher risk of liquidation. If the Risk Rate reaches 10%, forced liquidation is triggered. This means all assets in your Credit wallet will be automatically collected by the system to repay your liabilities.

• Notifications:

When the Risk Rate is less than or equal to the Coverage rate (15%), you'll receive a notification via email or SMS, indicating that you're approaching the 10% liquidation threshold.

Risk Notifications

1. Email and SMS alerts when risk rate approaches critical levels
2. Proactive warning before forced liquidation
3. Opportunity to mitigate risk through:
   • Transfer to Credit Wallet
   • Liability Repayment
   • Collateral Adjustment

Preventing Liquidation

1. Monitor risk rate continuously
2. Maintain adequate collateral
3. Repay liabilities promptly
4. Transfer additional assets to Credit Wallet

Understanding Interest Rates

When using Crypto on Credit, it's important to understand how interest rates are calculated.

• Hourly Accrual: Interest on the loan accrues hourly from the moment the loan is credited to your Credit Wallet.
• Fixed Interest Rates: The interest rate is fixed at 0.008% per hour for Bitcoin-collateralized loans and 0.005% per hour for PHP-collateralized loans.

• Compounding: Interest is compounded hourly for repayment calculation purposes.
• Reduced PHP Interest Rate: There is a reduced interest rate for PHP-collateralized loans of 0.001% until February 28, 2025, 3:00 PM PHT.

Strategies for Managing Interest Rate Costs

• Be Mindful of Loan Duration: Since interest accrues hourly, aim to close your trades and repay your loan as quickly as possible to minimize accrued interests.

• Take Advantage of Reduced PHP Rate: If possible, utilize PHP-collateralized loans before the reduced interest rate offer expires on February 28, 2025.