Portfolio collateral refers to a collection of various assets used collectively to secure a loan or leveraged position. In digital asset lending and derivatives trading, this means that a range of different cryptocurrencies or tokens held within an account can be aggregated and used as security for borrowed funds or margin trades. This approach offers greater capital efficiency compared to single-asset collateralization, as the collective value of the portfolio determines the borrowing capacity and liquidation threshold. Risk management systems continuously monitor the aggregate value and composition of the collateral.
Context
Portfolio collateral is an advanced feature in decentralized finance (DeFi) and centralized crypto lending platforms, often discussed in news concerning institutional trading strategies and risk management. It allows for more flexible capital deployment and potentially lower liquidation risks by diversifying the collateral base. However, it also introduces complexity in assessing overall portfolio risk, especially during periods of market correlation or extreme volatility across multiple assets.
The unified margin primitive aggregates collateral across multiple DeFi venues, fundamentally solving capital fragmentation for advanced on-chain trading.
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