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Since y'all are on this topic of risk curve, my question is if you have MSTR in a brokerage and want to take a margin loans at 10% to repair a car or something, what amount of margin is acceptable and still stay on the safe side of Caitlin Long's "a fool and his levered bitcoin are soon parted".

Brokerage Rule is 35% of account collateral.

I'm thinking I need to stay above 35% in the worse drawdown scenario which would be 80%.

So if I have (10,000 -80%*10,000)* (1-0.35) I can borrow 65% of $2000 or $1300.

Does this make me a fool since this MSTR is leveraged Bitcoin already. I suppose drawdown could be worse than 80%.

Jake Woodhouse 1y ago

I think MSTR will be just as volatile up as it will be down

More so than BTC itself

So sec lending against MSTR would be very risky

Perhaps with a very small portfolio allocation at most

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Discussion

Z4 Explorer 1y ago

Loaning against Bitcoin or MSTR, if the value of Bitcoin / MSTR goes below value of loan, do they threaten liquidation? So need to provide money (margin call) to stop liquidation. Thats how it would work right?

If lots of people in the future loan against bitcoin, and all this info is public then there might be an incentive for whales to push price down and liquidate people so creditors can take the bitcoin. Incentive for getting hands on more bitcoin will be extremely strong in the future once people realise how unique of an asset bitcoin is.

Same would apply to MSTR too. Obviously volatility higher for MSTR because its already leavered.

This already happens in stocks and other financial trading. When leverage becomes too big then there is deleveraging by forced liquidation on people that can't meet their margin calls.

I'm definitely weary, yeah loan against small % of portfolio, increase cash flow but stay resilient to any manipulation.

mike 1y ago

Yep

mike 1y ago

Also is your other npub trying to DM me on 0xChat?

Z4 Explorer 1y ago

Yup that me, just DM you.

gojiberra 1y ago

yeah, i went through the process of opening a "margin loan" capacity however I misread the docs and the margin is only used for trading which i don't want.

Like what Jake is saying i guess Security loans is way too risky on such a levered product. Maybe when MSTR is the size of Apple then it might be OK for such loans.

The margin loan sort of opened a black hole in my account so when I realized it I just tiptoed away from the edge.

as Buffett says, "ladies, liquor & leverage". I got the leverage, now i just need the other two.