My opinion on Bitcoin collaterized loans:
They are not a result of The Bitcoin Standard.
They are the symptom of a collapsing fiat standard.
They are very similar to "Bitcoin Treasury companies" in this sense. Built to profit from a crashing world. Not built to rise a new one.
Leathermint
Yes. In the sense that I would never recommended someone to do this. I believe in the "stay humble and stack sats". To me this also means don't participate in such schemes in hope to get even more gains.
With that said, it's not impossible that the people who participate in this scheme end up winning from it. At the end of the day I'm also bullish on Bitcoin and bearish on fiat. I also have this fomo and the temptation to leverage myself.
My biggest problem with those loans is that they aren't being sold to us in an honest manner. First of all, we're told it's a way to keep ownership of the coins but by definition a loan means you lose complete custody and therefore they are not yours anymore. Also we're told they are a revolution in finance when, if we're being honest, it's just a way to go leverage and will eventually disappear as a service.
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Replies (11)
what if they're not used as leverage for buying more bitcoin but as a way to pay fiat bills without selling? (assuming the fiat bills owed stays under the bitcoin price appreciation)
assume a person has zero dollars but a bunch of bitcoin. how else could they pay fiat bills other than selling?
Borrowing fiat to pay bills is leverage too. Dosen't matter what the loan is used for. It's leverage. The point is that you are trying to profit even more from NGU. You are trying to eat without losing those potential gains on the chart. You're crossing your fingers that you're right and price will go up. You are betting. You are shitcoining.
There's nothing wrong with buying fiat to pay bills. Let's say I do business with someone and this person only accept Apple's as paiement. There is nothing wrong with my using Bitcoin to buy apples and then use those apples to pay him.
Are you against loans completely?
If not, why I can't use something as a collateral for a loaner?
I'm not. Loans are a very important part of an healthy economy. I just don't see the point of using money as collateral to borrow money except if you are betting on the chart price go up. A leverage trade. And so far nobody really denied this was the only use case for those loans.
I see the point in using a house as collateral.
I agree I do all of this because of fiat hell we live in. But it's not about price per say.
If you covert all your income/savings into bitcoin, every sell (I mean significant enough) is a tax event.
Coverting bitcoin back to fiat has a transactional price. Around 5% + 15% (in my country) on income tax.
So it's usually better to just borrow fiat, pay the debt with fiat.
But it's not a laverged trade for me.
work more, then u dont have to sell or borrow
That make more sense to me. If that's the reasoning I can't say anything bad about it. You're doing this because the state is in your way of healthy financial practice so you have to do this shenanigan.
My problem is more when people sell them as a way to spend without spending their money because they fear of missing out on NGU.
ok, that's just wrong. Laverage is indeed stupid.
Well not necessarily. Not all leverage is bad always.
If I use my house as collateral to get a loan and start a business I am going leverage to bet on myself. This can be good.
Tho if I use this loan to bet on the chart of the sp500 it is very bad leverage.
That was bad phrasing from my side.
I agree.
You need to know why and what for you risk your collateral.
you've convinced me
