If Bitcoin is such an amazing collateral, why do these Bitcoin lending services ask you to over collaterize your loan?
Discussion
The specter of volatility?
Yeah probably. But isn't it weird how the people who believe Bitcoin is the most pristine collateral of the universe also don't mind to lose custody of it for half the value in fiat? Weird terms to accept imo.
Not really if it's a small enough portion of your Bitcoin. It's just another tradeoff. It isn't something I've used, but if I did it would be no more than like 5-10% of my stack. Probably 5 or under.
What I would probably do for something like a car or house is do a traditional fiat loan and setup bill pay to something like Strike that reverse DCAs (I lack a better term) to pay the loan monthly. That way I keep the 2x Bitcoin and take advantage of a devalued loan over time. But this only works because I have income. I guess it would be different if retired and I only held Bitcoin.
👀 
Because if price drops they still get their money.
Loans aren't that bad if you can afford them. For instance ive had very success with btc backed loans. I took out loans that i knew i was a to pay back with in a short period. People want the 15k loan with a 3k income. Thats definitely not gonna work. Like me i wont take 10k 15 20k loan because my payments will be all fucked up because i know that my income cant afford it. Ive taken out small loans and paid them back quick. Im in and out im not hanging for a long time with the loan. Some place start loans at $100 🤷🏽♀️ i have no active loans because im chilling i did what i had to do cleared them and im kicked backed stacking some more.
So i found out dont take a big loan if you cant afford to pay back fast just because you have the collateral.
I have no problem against loan. What I'm wondering is why you didn't spend your money (Bitcoin) instead using it to take a loan of money that you now have to pay back.
I know what the answer will be to be honest. You did it because you were worried about missing out on Bitcoin gains. In a way you entered a trade.
I do it because i can pay bills for months in advanced and still keep my bitcoin. Loans to splurge and buy unnecessary stuff is not needed. My bills are paid on advanced and i still have my bitcoin. And yes getting your bitcoin back because you spent a large chunk or a big purchase is not easy. It always runs away.
*and keep my Bitcoin*
Yeah that's what I mean. You guys are not honest with yourselves when you take these loans.
First of all a partial custody is not self custody therefore those coins do not belong to you for a period of time.
Also the reason you want to keep these Bitcoin in your name on paper is that you don't want to miss out on chart gains. You're entering a leverage trade against fiat.
I live in America and i cant spend bitcoin im sorry if i have to work with what we have. Yes i was knocking loans till i tried and really understood them. Now i take out as i need untill things change that i can buy gas buy meat buy toothpaste toilet paper and all that at one store that i can drive to. Untill then we taking a small risk to live. Because i cant eat bitcoin if no one accepts it. Be happy im not selling to blackrock.
Buying fiat = spending coins
Nothing wrong with that. I don't care if BlackRock own money.
Bro i was taking out 2k loans bro. Hahaha 1k loans bro dont think im over here taking 10k and 35k loans. Haha im very small small fish i just have a big mouth hahaha 😆
The amount doesn't change anything to me.
Instead of spending your coins (buying fiat to pay for things) you decided to enter a fiat trade (shitcoining).
There is only 2 way to justify this.
1) You wanted to go leverage long on Bitcoin and did not mind to lose custody for this.
2) You wanted to avoid some kind of taxable transaction from buying fiat with coins and the loan allowed for this.
I can understand #1 and it make sense as long as you're honest with yourself. You did not mention #2 so I have to assume it wasn't the reason.
All I'm saying is that you guys use these collaterized loans as a way to go leverage, not simply unlock liquidity and that to me is shitcoinery disguised as Bitcoin.
Because I was broke, so I unlocked some bitcoin that I had.I unlocked it and I used some cash and then I paid back the cash and I got my bitcoin back into self custody. Some of us need to tap in to that Bitcoin we have without selling it. It only makes sense if it's gonna continue going up.
The problem is the unresponsible ones that think they can afford stuff, and they can't, and they end up losing the Bitcoin, and then they start crying on here, and others think that it's really bad. That's their fault. They should have been more responsible.
Could've just spend the coins on fiat to buy your stuff then buy back the coins when you can afford to save money...
I do it all because its rough out here in the hood. I seel corn. Yesterday i sold maybe $100 to buy some shit. I do it allllllll. In a small scale but i do it all fuck i sell on cashapp and buy on cashapp i really dont care. I do whats needed to survive. Not everyone diamond hands that living check to check thats bullshit or living in the usa that no store accepts bitcoin
I'm not saying anything about you having to sell coins. I don't mind. I do it too all the time too. I'm just saying it's gay to take a loan instead of selling UNLESS you are honest and you don't mind admitting you're going long or because you have some financial reasoning like avoiding taxable events.
And I'm not calling you a shitcoiner here. I'm not saying you're an horrible person. I don't want this to be perceived as if I'm calling you a fucking retard.
My guess is they source fiat from people who don't believe that and volatility. It makes no sense to keep a loan open when the borrower can buy more than what they put down as collateral with the borrowed fiat. I'm sure these borrowers also wouldn't want their Bitcoin immediately sold either. It would defeat the point of borrowing the fiat for them. The simplest solution (from what I can see, I don't use the products) is to build in extra Bitcoin to help avoid immediate liquidation.
Young and volatile. Long term I think Bitcoin will be the most pristine collateral for many reasons.
The market will have to change that. When someone starts allowing 75% LTV others will have to follow. When they start charging 7% API others will follow.
Rates are already way down from 1-2 years ago when unchained was charging 18% API after fees.