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When bitcoin was under 20k right after The FTX crash was the best time for you to take a bitcoin backed loan.

When bitcoin is within spitting distance of ATH in the 3rd green year in a row is the worst time to take a bitcoin backed loan. (3 green 1 red, red is traditionally ~ -80%)

Your odds of getting liquidated on a collateral that is down less than 5% from ATH are much higher than collateral that is down 80% from ATH already. (For sound collateral only, don't try this with shitcoins like ETH or USD)

TLDR, be fearful when others are greedy and greedy when others are fearful applies to getting bitcoin loans too.

So why is everyone hyping loans now? They get to confiscate your bitcoin in a liquidation next year.

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Discussion

rev.hodl 7mo ago

The big issue with taking a loan at low prices, is that you need to put up much more collateral to get the same purchasing power compared to when prices are higher. There is probably a sweet spot between the lows and now.

At least people are starting to admit that Bitcoin loans are fairly useless except under pretty narrow circumstances. The meme of - never sell your Bitcoin; borrow against it, is likely to get many rekt...

Bill Cypher 7mo ago

If you need a loan and you don't have enough collateral unless bitcoin is bouncing off the ATH, you can't afford it. Definitely not since you are going to get liquidated and lose the not enough that you have next year.

The % collateral is the same. That means that you always need the same amount of sats to not get liquidated at the same price. Loan at cycle bottom you get less dollars day 1, loan at market top you need more sats not in the loan to push in later after the price drop.

I'm not opposed to calculated use of loans you can afford for things that have large economic returns to you. That means understanding the algebra behind loan collateral for starters.

YODL 7mo ago

Funny, I never realized the BTC amount is unchanged. Obvious now, and very useful simplifying insight

Bill Cypher 7mo ago

LTV is a %. That means if you got your loan at 50k you need the same sats as if you got it at 100k and it crashed to 50k.

Algebra is fun.

Phil 7mo ago

Just had this exact same thought this morning. Bear market is when you want to do a 50% LTV loan

StellarStoic 7mo ago

Timing when is the best time to take bitcoin backed loan is no different then timing the markets.

I'm highly against any of that.

I lost some so you doesn't have to.

I hope someone will take my words seriously.

If fiat is going down in value. Why not taking a loan in fiat. Negotiate the best rates and in the end if inflation goes in your favor, you'll repay less then you borrow 😄

Stay Humble Stack Sats🧘

Bill Cypher 7mo ago

Fiat loans are totally the way. The point of this post was that the people trying to sell you bitcoin loans aren't doing that to collect fiat interest. They're planning on you getting liquidated.

Unless you have shit credit you can probably get the same rates in fiat land unsecured as bitcoin loans want with your stack on the line.