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what?

i’m not dishonest, maybe misunderstood? the point isn’t to grow fiat faster than Bitcoin, it’s to keep Bitcoin exposure without having to sell it. if someone takes out a Bitcoin-backed loan, they’re betting that Bitcoin’s future appreciation outpaces the cost of borrowing fiat. That’s not for everyone, but for those who believe in Bitcoin’s long-term value, it’s a strategic play, not a cash grab

ᴛʜᴇ ᴅᴇᴀᴛʜ ᴏꜰ ᴍʟᴇᴋᴜ 7mo ago

so, it's like taking out a mortgage

you don't think that eventually lenders are going to factor this in and offer rates that still see them do better than their baseline premium?

if i get a lone backed by bitcoin capital, and the bitcoin winds up being worth less than the interest i paid, i'm losing. i would have been better off keeping the bitcoin and running a lightning node to spend it frugally on business expenses than this nonsense. and if the purchases were feeding a profitable business, it has to do better than bitcoin's price appreciation or i'm not really benefiting.

most businesses mainly need a steady cashflow and if you already held your bitcoin for a long enough time to see it fighting inflation already it is already sufficient as a means to do big capex.

the only context that bitcoin as collateral for a loan works is about 2 year time window, if it's 3-4 years or more between acquiring and spending it, you are not better off.

which makes it a very high time preference choice to get a loan on it.

unless you held it for long enough to get to the next level of the stairsteps of the price curve it's not a good asset for loans, and if you did, you don't need loans.

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Discussion

jack mallers 7mo ago

borrowing against bitcoin isn’t for everyone, and it’s not a blanket recommendation. it’s about optionality and having this service available to bitcoiners, which now have over $2T of wealth. if you believe bitcoin will appreciate over the loan term and you have a productive use for the capital you’re getting, it can be a strategic move. otherwise, holding and compounding bitcoin may be the better play. it’s not about forcing a high time preference, it’s about maximizing optionality without have to sell the asset.

ᴛʜᴇ ᴅᴇᴀᴛʜ ᴏꜰ ᴍʟᴇᴋᴜ 7mo ago

if you don't believe that bitcoin appreciates better than 98% of enterprises at this point you are simply not even doing the most basic research on it.

what bothers me is that the lenders are essentially printing money to do this, their risk is basically below zero, which is kinda cynical and exploitative.

who better to give your bitcoin to for your enterprise than someone who is engaging in fiat loan activity with their bitcoin hating banksters? lol, really.

sure, you are gonna gain in fiat terms as the lender but i doubt this is the right move for a founder who is probably going to sink because of taxes and inflation on their fiat assets.

modulo 7mo ago

Jumping in and appreciate the opportunity to ask a couple questions:

1) does Strike or any related company lend out the bitcoin collateral for additional return?

2) What did you mean by “…holding and compounding bitcoin…”

Again, appreciate all the discussion.

ᴛʜᴇ ᴅᴇᴀᴛʜ ᴏꜰ ᴍʟᴇᴋᴜ 7mo ago

bitcoin doesn't compound so that's a deceptive statement right off the bat

it's an inflation hedge that is superior to gold, which is choked by the manipulations of rehypothecated paper at comex

modulo 7mo ago

Let’s let Jack answer that, but I get what you are saying.

What I always tell people about manipulated paper #bitcoin is if you think the price is consistently suppressed, consistently go buy more and take it into self custody. You can’t do that with any other product with such ease, and you are technically getting a discount on your bitcoin.

jack mallers 7mo ago

no, there is nonrehypthecation. we will also soon have some variation of proof of reserves lending

i meant just HODLing and the sats growing at something like 50% CAGR

ᴛʜᴇ ᴅᴇᴀᴛʜ ᴏꜰ ᴍʟᴇᴋᴜ 7mo ago

exactly my point... the only use case for bitcoin collateral based fiat lending is exactly capex that you expect to make better than the interest rate you get charged in a 2-3 year time window, and i woud add to that, only a year after halving and for the next 1-2 years after that is actually a bad time to do it, it only makes sense to loan out your bitcoin to a lender during the flat periods when your straight gains on your illiquid capital are going to be lower than a reasonable estimate of your positive cash flow from your enterprise

and i would further say that if your enterprise is overladen with costs already you get a bigger benefit from dropping staff, or freezing hiring than anything else during those times. the biggest business cost is people, and then just below that is regulatory uncertainty and taxation.

modulo 7mo ago

Thanks for making (non-)repos clear. It’s a wonderful thing, bitcoin, and a major company overlaying proof of reserves is groundbreaking.

Now, if we didn’t need to KYC ourselves for strike access, and the keys for bitcoin were also kept outside of strike, I would be at the front of the parade. Maybe someday we will be there.

jack mallers 7mo ago

yep, would be nice. can’t provide that due to laws, but i’m going to keep pushing

🐢 7mo ago

Regardless of laws, what individual in the history of humanity has loaned something to someone whom they do not know?

At some point it stops being a loan and starts being a gift because the former requires the item/money is returned. If you don’t know who you loaned it to, how can you ever expect it to be returned?

modulo 7mo ago

This is the future we need to build toward, building stateless, privacy protecting protocols that fiat issuing governments can participate alongside paper issuing corporates and individuals. All voluntarily participating.

Sounds like a fantasy, sure, but now that bitcoin has arrived someone will build it, maybe us, maybe the next generation, or maybe the generation after that. Someone inevitably will and because laws will not be a reason. So why not start now.

🐢 7mo ago

Even if the bitcoin depreciates over the loan term(which 12mo term is more likely than say, 48 or 60mo terms), the liquidity access can still be crucial for individuals who can beat the interest rate, as it’s all paid back in fiat, not bitcoin. The bitcoin just sits as collateral.

Say I wanted to build a house, but my primary asset is bitcoin, and therefor i don’t qualify for a construction loan. I could fund the building of my house using a bitcoin backed loan, then mortgage the house to pay off that loan.

Construction loans are getting harder and harder to come by, as builders don’t want to take the risk and prefer cash buyers.

ᴛʜᴇ ᴅᴇᴀᴛʜ ᴏꜰ ᴍʟᴇᴋᴜ 7mo ago

nothing i said disagrees with your argument. i'm just saying that timing is important, bitcoin bull markets are a bad time to lend it out, you would be better selling it little at a time during those periods.

🐢 7mo ago

Better selling it? So I can pay cap gains tax and then buy it back at higher prices?

Good way to stay poor.

kc 7mo ago

Yup, a good way to have fun….

jack mallers 7mo ago

timing the market is not strike’s job. we’re not here to speculate on bitcoin’s price or advise people on when to borrow or sell. we’re here to provide tools and optionality for people to make their own decisions. if someone believes bitcoin will appreciate and wants to maintain exposure without selling, they can now choose to borrow. if they’d rather sell, that’s their call too, we can help with that. we’re not in the business of telling people what to do with their bitcoin. we just giving them options to improve bitcoin’s utility for the world

kc 7mo ago

Timing is important. It seems like you know when the bull run is coming. Will you please let me know when the bull and bears will arrive?

2 quick items to think of.

1. When you sell bitcoin you only get fiat in return.

-plus pay taxes. That is great!

2. When you take a loan on bitcoin you

-keep the original bitcoin amount just use it as collateral,

-pay a small portion of the balance and interest,

-plus get fiat to use the fiat.

-pay no taxes.

If that isn’t winning… I don’t know what is.

I guess not everyone runs their life like a business. Some run it as a consumer.

DRE 7mo ago

People can make their own decisions, we are all big boys with big boy pants.

Stop derailing the original conversation about the jewish connections with this left curve nonsense

YODL 7mo ago

I'm curious if you know what happens if there's a significant drawdown. Does one need to add more collateral to avoid partial liquidation? Guessing so, but never seen it addressed

DRE 7mo ago

Yeah typically the lender wants you to maintain a certain LTV (typically ~50%) if that goes up they will probably ask you to add more collateral and when a threshold is met and no additional collateral is added they liquidate the collateral to protect the loan

YODL 7mo ago

Thanks, thought it was strange hadn't heard it addressed. Grace periods etc., don't really know how it all works. Prob worth educating people more about that imo

DRE 7mo ago

Yeah, it’s a pretty standard practice similar to trading on margin and needing to keep the margin maintenance at a certain level to avoid getting a margin call.

I imagine the user interface walks you through this when you take out a loan

2Pac 7mo ago

Yes margin call at 70% LTV with 24 hrs to bring collateral up to 60% and 80% causes liquidation. It’s a bad idea.

2Pac 7mo ago

https://strike.me/faq/what-are-margin-calls-and-liquidations/

YODL 7mo ago

24 hours is pretty tight, but at least terms are clear and maybe that's standard. Thanks for linking

2Pac 7mo ago

That fact that bitcoin regularly drops 30% even in a bull market almost guarantees a margin call.