I don’t use Nostr as much as I should, but why get a bitcoin collateralized loan with terrible rates and terms if there’s still plenty of fiat based alternatives with better terms and you don’t even have to risk putting up any % of your stack as collateral.
Discussion
BECAUSE THEY WON'T BE
Do people get good loans borrowing against stocks. The answer is yes especially with low loan to value ratios. BTC is about to be "normalized". It is pristine collateral. Smart contracts will allow BTC to sit in collateral until the loan is repaid and any default instantly covered.
The fiat industry will understand the guaranteed ROI of this and make products for it, BECAUSE THEY ALWAYS DO.
The lowest interest loans (other than potentially government subsidized home loans) that exist will in the future be collateralized by BTC. Why would they not be?
Stop thinking like a bitcoiner for a few moments and think like a banker.
I can loan this guy money as say 5%, he will collateralize the full value of the loan for the entire duration of the loan, if he defaults I instantly get paid by a "robot".
You may have to lock up 6% of your holdings to borrow 3% but who give a fuck when my goal is to NEVER SPEND IT. Every asset class that has ever emerged and normalized has done this in time. Never has one been so perfectly suited to it.
I do think one day we will "spend bitcoin" the way many fantasize about. I think I will die before it happens. It requires not just the death of fiat money, but the fiat world and that will take time. If we are on a star ship we are on a generational ship, we are generation zero. We will have a lot of fun, build our lives, raise our kids and grand kids but we will DIE IN SPACE. We got on the ship for decedents we will never know. But they will know of us.
In the interim we will build the infrastructure for them to use when they step onto a "new planet".
Honestly as early as this is, we should call ourselves, "Generation Zero". It is the mission you signed up for, whether you knew it or not.
Thinking like a banker they’ll realize that the return on the loan yields less Bitcoin than what they lent out if Bitcoin appreciates at a higher % than the rate of interest the payments on the loan generates. It makes issuing the loan undesirable unless it’s at extremely high rates. High interest rates are a natural consequence of having a finite supply money which lays the ground work for a cost of capital determined by free market supply and demand price signals for debt rather than the FOMC. And thinking like a potential future consumer of one these debt products why would I get a bitcoin loan at 17% interest when I could get a HELOC for 1000 bps (or whatever it may be) below that rate? Or even if I didn’t have a home to use as collateral, there’s too many other fiat options to name. I don’t see a world where a Bitcoin collateralized loan ever becomes desirable unless if you’re super rich with a top .1% income but even in that situation you’d still have access to better options. I actually think bitcoin collateralized loans will become far less desirable as Bitcoin continues its path toward monetization, and they won’t naturally gain traction unless if we lived in a world where there was no other way to borrow.