Are you prepared to put up twice as much bitcoin as your loan amount as collateral? And then are you prepared to put up even more than that to keep your loan healthy when the Bitcoin price dips hard unexpectedly? I’m not saying don’t take a loan against your sats, but think long and hard before you do it. Exhaust other financing options, and if it’s for something relatively small just spend a few sats and enjoy not having that debt weighing on you.
Discussion
im opposed.
defeats the purpose and my principles especially when it comes to escaping fiat games.
I could see it perhaps as a means of financing a business endeavor, or something like that where the investment is to create something that generates cash flow. But just as a way to buy something like a vacation or car, makes zero sense to me.
<10% of the stack, the less the better
Or, radical idea: spend less, accumulate less, and avoid the debt trap entirely. Live debt-free. Your sats (and your peace of mind) will thank you. 🙏 #NoDebt #bitcoinmaxi
I'm not recommending anything.
But I think it's certain that Bitcoin will forever appreciate against FIAT. So if your loan is hypercollateralized, BTC's declines are already predicted by the significantly higher collateral than the debt. The interest on this loan, of course, should be really low, considering the strength of the collateral.
That said, you keep your savings/assets in BTC while your debts remain in FIAT, which makes you richer over time, since FIAT loses value and BTC gains value.
More than the financial risk, the biggest problem here may be the custody risk, operationalizing this in a safe way is a big challenge.
The loan terms from Strike are for 12 months, not forever. 😂 And as with any bitcoin loan they require you to maintain a certain LTV ratio (loan to value), which is affected by the market price of bitcoin. If bitcoin’s price within that 12 month period dips hard (as it often does in the short term), then you could face liquidation if you’re not able to post more collateral or immediately pay the loan down enough. Plus the custodial risk and the interest costs. Not worth it unless it’s an absolute last resort, and even then you risk less of your Bitcoin by just selling/spending some of it. These loan products need to improve significantly before they make much sense.
I agree with everything you said.
My comment is more about the "hypercollateralized loan in bitcoin" in general, not this specific 12-month one. I don't know what the man in the photo said or represents.
About the contract in general:
As I said, the interest must be fair to the guarantee, it must be low.
Although I didn't say it explicitly, the contract needs to be long-term, because BTC is volatile, but it always appreciates against FIAT in the long term. I would say it would need to be at least 1 BTC cycle. And in the same way that you have to replenish the guarantee, there must be some clause releasing the surplus when it exceeds the agreed ratio for the hypercollateral.
And as I also said, you have to check the custody risk very carefully.
With that said, about the specific contract you are talking about, I agree with you.
On nostr:npub15ax0056u0p8hmgtstzg9emx7h9wad4ucnuutj89trsvuzdaehqhqdpc7af has no custodial risk.
I am going to say it: don't take out a KYC'd fiat denominated loan against your Bitcoin.
#KYCNotMe
Strike wants to buy your data cheap during bear market
I completely agree with you, but....what if Bitcoin fells tomorrow to 58K?.....
Then you sure as hell don’t want to have an outstanding loan against your bitcoin. You’d have to add more than half your original collateral (on top of the existing collateral) just to keep the loan at the minimum LTV ratio, at that’s best case scenario. Most likely your original bitcoin collateral got liquidated with a price drop that sharp.
No....what I mean is.... Would you take the loan at 58K? And use it all to purchase Bitcoin at 58K? It's at the least tempting even for the most conservative
Why not just take a personal loan that doesn’t involve your bitcoin?
Because 1. That's complicated. 2. It's only available to some people in very few countries.
Also, to someone who quit their job, lives in a fort with solar panels and hens....there is no financial institution to get a loan from.... But that person will want to take advantage of a 58K price
You do you. Your situation does not describe most people.
If you have a large stack and don’t own dollars, you could take out a loan against 5% of your bitcoin with lower risk.
Still has to be paid back. Still has to maintain the required LTV ratio. Still costs a shit ton of interest, and custodial risk. I’m not saying there are no scenarios where it would make sense, but there aren’t many.
100%
This is a product for whales really. Plebs who are stacking and have under 50-100 bitcoin probably should not be considering products like this despite the fact that they will be pushed hard to use them
+ keep working to avoid forced selling and the need to borrow