Weiss Ratings, a Florida-based ratings and research business, has issued a warning about the risk of crypto mortgages with regard to the present US economic situation. Weiss analyst Jon D. Markman warned against crypto mortgages in a May 3 research note, citing the dismal performance of equities and cryptocurrency this year, a housing bubble in the US, rising interest rates, and the Federal Reserve’s forthcoming policy adjustments as reasons. He remarked:
“The product seems to be like a win-win, assuming real estate and crypto prices keep rising … except there are signs both bets are unlikely to be winners in the near term. Bitcoin is off by 40% since it reached $66,000 in November 2021.”
He went on to say:
“And U.S. property prices now face headwinds from a change in Fed policy and rising mortgage rates.”
Markman also emphasised that not all crypto risk is negative, but that is not the case of real states. All crypto mortgage schemes are risky in the real estate industry, before adding that “no matter what the markets are doing, the potential to succeed in cryptocurrencies is real.”
Many cryptocurrency and stock investors have been fearful about the market ramifications of significant interest rate rises this year as the Federal Reserve attempts to rein in inflation.
With both markets underperforming owing to a variety of issues, macro experts such as Alex Krueger have boldly predicted that the Fed’s recent comments this week “will determine the market’s fate” moving ahead.
Digital banking business
Milo is a digital banking firm located in Miami that offers 30-year mortgages secured by Bitcoin (BTC), Ethereum (ETH), or stablecoins. As there are no down payments necessary and the company’s financing rates range from 3.95% to 5.95%. The mortgage scheme has attracted attention from other businesses. Milo received a $17 million Series A investment in March and plans to grow its mortgage options as well as its personnel to accommodate rising demand.
On the other hand, Markman expressed worry that Milo’s “larger plan is to pool crypto-backed home loans and offer them as bonds to asset managers and insurance companies,” comparing this to the activity that led to the housing market meltdown in 2009.
According to the mortgage terms and conditions, the price of the collateralised crypto assets “may decrease in value with no effect as long as it does not sink to 35% of the entire loan amount.” Users have to top up their collateral within 48 hrs of reaching their requisite percentage so that they can avoid liquidation. On the other hand, Stablecoins might be useful during market volatility.
