Collateral Ratio is the division of the sum of all assets by the sum of all liabilities, where:
- Assets refer to the amount of crypto held in all the wallets Bitso owns keys to.
- Liabilities refer to the total sum of Bitso's customer balances.
For any exchange to be solvent, assets must be greater than liabilities, that is, greater or equal to 100%.
Why does it matter?
If a custodian has a ratio smaller than 100%, they hold fewer assets than required to provide liquidity to all customers. So, if all customers want to withdraw 100% of their funds at once, they wouldn't be able to do so.
Having a ratio equal to or greater than 100% indicates that a custodian is solvent and that your funds can be retrieved at any given time – without trouble.
Other articles you may like to read next:
- What is Proof of Solvency? Why is this the Proof that Matters?
- Where can I find Bitso's liabilities report and Merkle Tree?
- How should I interpret the information shown in the Proof of Solvency webpage?
For informational purposes only, this is not investment advice. When buying, selling, trading or using cryptocurrencies you are subject to certain risks including price volatility and loss of capital, for more information please visit the following link.