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I'm using ledn, and the idea is that I take a loan out to cover my next month's fiat expenses and pay it off with Bitcoin as the price increases.

Say I take out a 1000 USD loan at 80k BTC with 15% APR on a 12 month term, that's 1,250,000 sats. In a simple case, if Bitcoin immediately rises 20% to 96k and I pay off the loan, I only need to use 1,111,111 sats to pay it off (or a more as interest accrues).

In doing so, you essentially buy 1000 USD for 888 USD in the no interest scenario. With interest, that margin will shrink, but if Bitcoin grows even faster than 15% APR, then that margin will increase.

My only heuristic is to pay down the debt when the Bitcoin price is higher than when I took out the loan because I'm too retarded to calculate all of the above as I'm paying it off. If the Bitcoin I spend is less than the amount when I took out the loan plus interest, it's profitable. But it's way better than buying debt to buy Bitcoin since I can pay off the debt at a loss and not really care too much since I was spending that money anyway.

node 1y ago

This is pretty cool. And what happens if the price of Bitcoin goes down (during the bear for example)? Is there a floor price at which they cancel the loan to cover the losses?

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Discussion

Jay 1y ago

Yeah I'm just hoping it's not too much work for too little return, but it'll be fun to try.

The loan is collateralized with twice the value in BTC to begin with and if that LTV, loan to value, rises roo much, I get margin called at 70% and liquidated at 80%. I'd reach the margin call of my current loan if Bitcoin goes back to 58k and I haven't paid any of it back and I'd get liquidated at 50k.

So it's not a great idea to run this strategy past the bull market peak.

node 1y ago

This makes sense