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This is the correct answer.

It is also typically cheaper to pay the APR than it is to pay cap gains.

13% APR on 100k loan @ 50% LTV means put down 1.818 BTC for the 100k disbursement. Total interest on the 1 year loan is $7,180.73. Loan interest payments are also tax deductible.

If you sold .91 BTC to get the 100k cash then you would owe 15% of your gain. So if your cost basis was less than $52,000 you would pay more in cap gains than interest.

If you took a loan against your sats one year ago exactly you would be up 75%, and that’s the real reason why people borrow against their stack vs selling.

Nate 4mo ago

Sure. Its subjecting 1.818 BTC to custodian risk to save a small difference between APR and cap gains.

I guess my point is thats alot of risk for a very small reward.

The appeal is to possibly capture the 26%+ CAGR of the collateral, assuming the custodian risk doesn't harm anything.

Idt most Celsius users expected Celsius to freeze withdrawals when it did.

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Discussion

BTC_P2P 4mo ago

The .91 BTC that would’ve been sold saw an increase in value from $56,420 ($62,000 x .91) to $100,100 ($110,00 x .91). A difference of $43,680 in the past year. That’s the main reason why people borrow against their bitcoin. But there is not guarantee on those results.

There are multi-sig lending platforms that ensure at minimum the lender cannot control funds without the borrowers keys.