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What you are describing seems more akin to option trading in tradfi than loans. The only reason someone would be willing to give 200k worth of collateral for a 100k loan is because they are betting that the 200k worth of crypto will increase in value more than the interest on the dollars they are borrowing.

The use case for almost all individual loans in tradfi is getting a loan for more than you have in collateral.

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> The only reason someone would be willing to give 200k worth of collateral for a 100k loan is because they are betting that the 200k worth of crypto will increase in value more than the interest on the dollars they are borrowing.

Well, most of the people who have crypto to borrow against would fit the description of "betting crypto will go up."

Tax implications might also play into the consideration of selling vs taking an overcollateralized loan as well.

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