Introducing the VegaX Crypto Loan Program

VegaX has a loan program that is available to new users. The loan program includes different types of loans and specifics regarding the loan terms. They are as follows:

Leverage Loan

Borrowers can borrow up to 3x of their bitcoin deposit (collateral). The initial loan to total asset value (LTT) can range from 1% — 75%. There is an origination fee, monthly interest, and rollover fee.

If loaned the max amount, the LTT would be 75%, and the loan would be similar to opening a future position of 4 BTC with a 1 BTC margin. If the price of bitcoin falls more than 20%, then the collateral has to be seized (or we can say the loan(position) has to be liquidated.)

Loan size options: 0.5–100 btc

Loan period options: 6–36 months

Cash Loan

Borrowers can borrow up to 50% of their bitcoin deposit (collateral). The initial loan to Value (LTV) can range from 1%-50%. There is an origination fee and monthly interest.

It is the same as a traditional bank loan, where you can use your real-estate, property, savings account, or stocks as collateral and borrow money from the bank. If the value of the collateral falls, the LTV will go up. Therefore, when loaned in a max amount, the collateral will be seized (or we can say the loan (position) has to be liquidated.)

LTV

Loan to Value = loan value / collateral (asset) value

LTV is a widely used term in finance, especially for housing (mortgage loans). It stands for Loan to Value and is a term that expresses the ratio of a loan to the value of an asset.

ex) if you own a property that is worth 1 million dollars, and the LTV a bank offers is 70%, then you can borrow up to 700k dollars from the bank by providing your property as collateral.

In our case, the max LTV of the leverage loan is 300%, and the max LTV of the cash loan is 50%.

One thing to keep in mind is that for mortgage loans, you are the owner of the house and you are paying back the money the bank loaned you. You also have to pay back the principal plus the interest. However, for our 3:1 loan, borrowers are borrowing bitcoins. Though they will take all the profits from the bitcoin price jumps, they still don’t own the bitcoins, and they don’t have to pay for the principal, only the interest. That’s why we made up a ratio that will stay below 100% for the 3:1 loan, LTT.

LTT

Loan to Total Asset Value = loan value / collateral value + loan value

Loan to Total Asset Value(LTT) is a terminology we made up for our loan program. Since we lend more than the collateral value, using LTV would be confusing since it would frequently go above 100%, which is not a normal bank loan. It’s better to use a ‘loan’ than to use a ‘leverage product’, so we made up a new ratio called Loan to Total Asset value.

The loan is obviously the bitcoin that we lend to a borrower. Total Asset Value here is the loan plus the borrower’s deposit value (or the collateral value).

One thing to keep in mind is that if the bitcoin price goes down, the value of the bitcoin that we bought with usd and then lent to borrowers goes down, so we have to fill the loss with the borrowers’ deposits (the collateral). Thus, if the bitcoin price goes down, the Total Asset Value stays the same but the loan value goes up (we lent more money to the borrower due to the loss from the loan position).

Example: If a borrower deposited 1 btc, and asked for a 3 btc loan when the bitcoin price was 1,000 usd, the initial LTT would be 3btc / 4btc = 75%. If the bitcoin price drops 10%, the Total Asset Value would go down to 4,000*(1–10%) = 3,600 usd, so there would be an unrealized loss of 400 usd. If this happens, the collateral value would also go down by 10% and become 1,000->900 usd. Since there is an unrealized loss of 400 usd, the collateral value has to go down 400usd additionally, which would be 1000*(1–10%)-400 = 500usd in total.

The new Total Asset Value would then be 3,600 usd, and the collateral value would be 500 usd, and thus the loan value has gone up from 3,000usd to 3,100usd, and the new LTT would be about 86%!

In the table below, the bitcoin price started at 1,000 usd.

If a borrower borrowed the maximum amount with his 1 bitcoin deposit (collateral), the loan value, collateral value, and total asset value would change as shown below.

Loan process

1. Login to VegaX.
2. Click ‘apply for loan’.
3. Choose the type of loan (3:1 or cash loan), collateral size, loan size, and the loan period (for a cash loan, customers also have to choose between a lump-sum payment and a level payment).
4. VegaX will show how much the customer will be paying for fees and interest and other loan terms.
5. After the customer confirms, VegaX will provide him/her with the wallet address that he/she has to send collateral (BTC) to.
6. After sending collateral, the collateral amount will show in the dashboard.
7. Clicking on the ‘execute loan’ button will start the loan! A loan dashboard will be available.
8. When the borrower needs to pay for fees or interest, the dashboard will show this. If no new deposits are made, then the fees/interest will be deducted from the collateral until liquidation.
9. At the end of the loan period, for a 3:1 loan, the loan will automatically be closed and the profit + collateral will be sent to the customer’s wallet. For a cash loan, the customer has to send the cash (usdt) back to VegaX’s wallet. If he/she does not, the collateral-loan amount will be sent to the customer’s wallet.

Balance check

VegaX will check the loan users’ deposit balance on a daily basis to make sure the users have large enough balance to hold the loan position (whether the LTV or the LTT stays below the liquidation or warning level) and to pay for the next payment. All of these checks will be done in an automatic manner.

Deposit & Withdraw

• Collateral needs to be deposited into VegaX’s customer wallet in order to start a loan.
• Users can only withdraw up to the minimum required collateral amount + 3 months of fees and interest. If, for example, a 3:1 btc loan borrower deposited 1.3 btc and has a loan of 3 btc, and 3 months of fees and interest is 0.1 btc, then he/she can only withdraw 0.2 btc from the deposit.
• When more collateral or margin is needed, users have to deposit more bitcoin into the VegaX wallet.

Loan fee & interest schedule notice and table

Notice for fee & interest payments will be sent to the user’s email address a week before the payment has to be made.

A fee & interest schedule table will be placed in the dashboard to let loan users acknowledge when the fees & interest will be withdrawn from the wallet.

The table will look like this.

Loan and qualification requirements

• Client needs to have at least KYC level 2.
• Client must have a crypto wallet that we can send crypto to (when giving back crypto).
• Client must have deposited at least the minimum collateral amount + the origination fee + 3 months of interest payments in crypto to the VegaX wallet.
• Client must sign a loan contract mentioning the term of the contract (liquidation, payments, terms, maturity, etc).

Fees and interest rates (3:1)

Origination Fee: 0.5–1%

Origination Fee: 0.5%-1%

• Origination fee will be withdrawn from the balance as the loan is served

Annual Interest: 5–9%

• Monthly interest will be withdrawn from the balance at the end of every month (if 1 month is not filled, partial interest will be withdrawn according to the date)
• Or what we can do is withdraw monthly interest starting from a month later, and withdraw interest every month after that
• When the borrower wants to close the loan before the end of the month,(the word payback does not make sense since he/she is not required to pay back the total amount of the loan), then partial monthly interest will be applied. (if he/she decides to close the loan on July 7th, 7/30*x% will be applied)
• If the payment is not made, then it will be deducted from the collateral

Rollover over fee: 1–1.5%

• Since we are going to use futures to make the position, there will be a rollover fee at the end of every March, June, September, and December
• The Rollover fee will be withdrawn on the same date for all borrowers

Early redemption fee

Fees and interest rates (cash loan)

Origination Fee: 0.5–1%

• The loan will be transferred to the borrower after deducting the origination fee
• If the user deposits 100k worth of crypto, and loans out 50k, then 50k*(1-x%) will be sent to the user

Annual interest: 5~9%

• Borrower has to pay monthly interest by depositing the amount to the Vega X wallet.
• If the payment is not made, then it will be deducted from the collateral
• The payment due date will be the same as the 3:1 loan

Overdue Payment: 12%(per year)

• If the borrower has not paid back the principal + interest at the loan maturity date, there will be an overdue payment charged every month, which will be much higher than the monthly interest.

Early redemption fee

• 1% annual interest on remaining period

Lock-up period

3:1 loan: 3 months

Cash loan: 3 months

Warning and Liquidation level (3:1)

• A warning will be sent starting at 80% LTT.
• The deposit will be seized by VegaX (the margin will be liquidated) when the LTT reaches 95%.
• Residual bitcoin after liquidation will be sent to the user’s wallet after deducting the fees or interest that are not fully paid.
• In order to stop receiving warnings or avoid liquidation, borrowers have to deposit enough bitcoin to make the LTT go below 80%.

Warning & Liquidation schedule

Warning and Liquidation level (cash loan)

• A warning will be sent starting at 70% LTV (which means if loaned in the full amount, the bitcoin price has dropped about 30%).
• The collateral will be seized by VegaX (will be liquidated) if LTV reaches 95%.
• If there is a balance (collateral) left after liquidation, it will be withdrawn to the user's wallet.
• Residual bitcoin after liquidation will be sent to the user’s wallet after deducting the fees or interest that are not fully paid.
• In order to stop receiving warnings or avoid liquidation, borrowers have to deposit enough crypto to make the LTV go below 70%.

Warning & Liquidation schedule

Loan Redemption

At the end of the loan period, for the 3:1 loan, the loan will automatically be closed and the profit+collateral will be sent to the customer’s wallet. For the cash loan, the customer has to send the cash(usdt) back to VegaX’s wallet. If he/she does not, the collateral-loan size will be sent to the customer’s wallet.

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