If you took out a loan against your bitcoin and are currently being margin called, will you warn others about doing the same?
Will you take a close note of the people/companies who created these products, who backed them and who shilled them?
Please think long and hard about these products and do not risk getting rekt.
I had a feeling something fucky was going on when, near the top, I saw someone shilling Bitcoin collateralized loans that you would "never need to pay back"
Don't blame the product for the users' recklessness.
In any such product keeping sufficient collateral posted is fundamental, and no matter what engaging with such things always comes with more risk than not.
There are no solutions, only tradeoffs.
Therefore just spot & chill. Thereās no need to take these shitty fiat products. š¤·āāļø
I'm a Strike customer and have a huge amount of respect for nostr:nprofile1qqsvf646uxlreajhhsv9tms9u6w7nuzeedaqty38z69cpwyhv89ufcqpp4mhxue69uhkummn9ekx7mqpr4mhxue69uhkummnw3ez6ur4vgh8wetvd3hhyer9wghxuet5tm8sjr , but the borrow against your bitcoin narrative has been something I've struggled to reconcile in my own mind. I've tagged Jack as a Strike user, but it could have been any number of people really.
As I understand it, Strike have partnered with financial service companies like Nydig to offer the funding for their loan products. That's Nydig led by Ross Stevens, who was interviewed by Saylor at the MSTR world conference in 2021. I reference that because Nydig clearly understand bitcoin deeply.
Amongst that understanding will be that, if measured in dollars, as an asset within the current system (which it's not), it has a CAGR of roughly 50%. It begs the question then, why would they sacrifice this return for an interest rate of 10% on capital lent out to bitcoiners? Particularly if they understand this at a fundamental level.
The play here is to amass bitcoin and it seems clear to me that they will have run the probabilities and come to the conclusion that enough people will get overstretched, under-collateralised, and ultimately margin called.
They're always 12 month terms, which is not a safe investment period given bitcoin's volatility. Jack and Mark Moss have both given examples of how these products could work, but always with a 12 month loan, whereby magically, at the end of this period, bitcoin's price will have risen 50%.
I find it totally misleading and, given that bitcoin is perfect collateral and doesn't require credit checks, people will be able to enter into these loans very easily.
I'm sure I'm getting something wrong along the way, maybe with how the funding process works behind the scenes, but I'm old enough to remember 'not your keys, not your coins'. This message seems to have been lost in the name of 'collaborative custody'.
I can't help thinking that a lot of people are going to have to eventually make a choice between defaulting on their loans or continually posting more and more of their stack as collateral.
I'd love to hear a response as to why I'm getting this wrong.
Thank you for sharing, Andy.
It only works if BTC goes up. Picking the right 12 month within 4 years is an incredible variant here that shouldnāt be underestimated. Very few people talk about it.
Very interesting thoughts. Boosting to get more conversation started on this. I wonder if there is any future plans to bring type of multi sig wallet behind the Borrow product to hold the collateral. Iām also a big fan of Strike and nostr:nprofile1qqsvf646uxlreajhhsv9tms9u6w7nuzeedaqty38z69cpwyhv89ufcqpp4mhxue69uhkummn9ekx7mqpr3mhxue69uhkummnw3ezucnfw33k76twv4ezuum0vd5kzmq8m2uqr so Iām glad people are bringing light on this because theyāve been fully transparent on everything else so far.
I have yet to take debt against any Bitcoin, I just havenāt been able to make sense of it either
- liquidation risk
- counter party risk
- peace-of-mind risk
- tax risk
- re-hypothecation risk
Is it really worth it, especially when you have to over-collateralise?
Picking up pennies in front of a steamroller as they say
Itās kind of like the medical industry, that canāt monetise rest, sleep, mindfulness, healthy diet, so push solutions that donāt hit the root cause
Itās hard to monetise bitcoin in self-custody, crunching away with a huge cagr, and no counter-party risk, so the fintech world canāt stop themself
In regards to the opportunity cost of the lender lending vs owning Bitcoin, I think there are a number of reasons why those with lots of dollars want to keep dollars at 12% apr. Could be they are a dollar only fund. Could be they arenāt allowed to buy Bitcoin
I liked Debifi in theory, and there was a lender on there who just wanted a roi on dollars, but I got a poor review of the management, and the liquidity and sizing is poor
Sygnum Lombard loan was the most interesting, but even then, when you take the loan, what are you buying? Hard to square it away
Would love to learn what I am missing
But I think the truth is: self-custody, and go live life, you will outperform the market with far less risk
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Pedophile
Make sure you have dollars or bitcoin to prevent liquidation
Greed always catches us eventually. I think we want to get away from leverage and borrowing.
Itās usury. Period. Thereās a place for credit in life, Iām not saying you should borrow 0 money ever.
But the intent is to get your bitcoin. Otherwise they wouldnāt offer the product.
I'm pretty sure Jack said he only does like 5% of his stack so he has more than enough to meet the margin calls. End of the day we are all big boys here and the product might not be for you but it might be for someone else. Do your own research and Caveat emptor.
Agreed. But they will know full well that many people will gamble with larger portions of their stack.
My brother works in finance and he's always seen 2008 as a result of irresponsible borrowing. But there are two sides to every coin. Predatory lending is the enabler of irresponsible borrowing.
You're right. Many will use it as some kind of leverage, perhaps the majority, but I see it as a important step stone to living in a full bitcoin standard. It's not ideal but it's what we got for now.
Maybe. Honestly, I've got more questions than answers at this stage. The two systems are fundamentally incompatible. These products use bitcoin as an asset within the current financial system, rather than recognise it as something completely new, freestanding and independent.
I appreciate nostr:nprofile1qqsvf646uxlreajhhsv9tms9u6w7nuzeedaqty38z69cpwyhv89ufcqngza3a. He's one of the best orators on these topics in this space. I fully believe he's a good actor and simply creating things in response to customer demand. He's a prolific contributor and we're lucky to have him. I'd like that to be completely clear.
I just can't square the circle of using bitcoin as collateral within the debt based fiat system, when I see it as a replacement. Perhaps it's part of the bridge to get there, hence why I ask the questions.
Yes, I echo the sentiment.
I suppose that (at the moment) itās (not but itās supposed to be) a free world so Jack Mallers and everybody else is free to do whatever they want. And I am free to š¤® when I see what they are doing.
The whole planet is about to reach peak communism/fascism, and some of us (not many, thankfully!) are trying to convince others to gamble their life raft tickets.
Wellā¦ like said, people are free to do whatever they want. But the next time when somebody, who is asking people to borrow against their #Bitcoin, delivers a very emotional keynote speech in which he talks about economic hardships leading into very sad outcomes, this is the proper reaction:
This message is probably for the twitter crowd.
These arenāt the plebs youāre looking for.
Save in Bitcoin self-custody. That's the way
Do not lose your corn š«”š§”š«
The liquidation price for a bitcoin backed loan at 110k is around 65k- I think those that took them are fine..
I find this cancel-culture mob behavior pathetic. My phoneās blowing up with accusations from people who have no idea what theyāre talking about.
Iām in Costa Rica before an event, so here are a few quick facts straight from the source, for those interested:
Strike performed flawlessly through all of the recent market volatility. Zero downtime, 24/7 support, and the biggest day in our companyās history across all product lines yesterday. Thank you to every Bitcoiner who supports us.
Strike Lending continues to lead the market. We had zero margin calls today, and have never margin-called a customer, ever. Our loans open at 50% LTV, with customers averaging closer to 40%.
Weāre building a reliable, trustworthy credit market on Bitcoin. The existence of bad or irresponsible actors doesnāt make the tool itself bad. Does a man using a hammer to harm others disqualify the one who uses it to build a home? Of course not.
Credit is a tool. Used responsibly, it empowers people. Used recklessly, it destroys them. Thatās true of any financial system. Credit on Bitcoin can do so much good for the world, and weāre building it the right way: transparent, regulated, and built for Bitcoiners. In fact, we are actually in the middle of building a loan type where you can pay a premium to remove the possibility of ever getting liquidated. We hope to launch it in Q4! Imagine that, from the very people that are being accused of the opposite.
Anyways, do you really want me deciding whatās āgoodā or ābadā for everyone else? Thatās not Bitcoin. Encouraging mob behavior against those actually building tools for financial freedom is backwards.
Iām used to this kind of noise, but our team has the best product velocity in the industry, they deserve none of it. Tag me and come at me if you want to spout nonsense.
If you donāt want to use our tools, donāt. Iāve never forced anyone to do anything. If you do, please use them responsibly, and if you have questions, reach out. Weāll always answer.
Now, Iām off to the event with the Strike team. Stay humble, stack sats, and build the future however you see fit (that's a lot of the point)
Only leveraged idiots are being margin called. I have buys open since 120k and won't be called upon until 60k.
Most lones have an LTV of 50%, nobody with those kind of lones had a margin call this weekā¦
Bitcoin has to drop way lower before even getting a margin call and even lower before you get liquidated..
Youāre spreading unnecessary fear and misinformation
Chill Daniel. You canāt keep people from being stupid. Jack and Strike are good actors.
šÆšÆ
itās like a knife or a gun. if you arenāt retarded you can use it as a tool for your gain. if youāre retarded, you might kill yourself.
Alright mum, calm down
I have a couple of Bitcoin-backed loans, which represent only 10% of my total sats. I trust @jack mallers completely. I took out these loans and saved the interest payments in a high-yield savings account. This way, when itās time to refinance, I wonāt have to worry about finding additional income or facing financial stress. This is how wealthy individuals manage their assetsājust a little leverage is perfectly acceptable. Donāt worry, Mom! Weāre adults now. š
And what about personal responsibility?
I use Bitcoin backed loans all the time.
No liquidations, a nice healthy 25% LVR, never selling the underlying Bitcoin, living the good life šļø
If you are a man baby and you donāt understand risk and you do yourself a mischief by blowing out your LVR and getting rekt - thatās on you.
Most Bitcoiners: NEVER SELL YOUR BOTCOIN!
Most Bitcoiners: NEVER USE BITCOIN TO TAKE A LOAN!
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Well what are you going to do with it anon? Treat it like a pet rock? šŖØ š
Where do you borrow from?
Disclosure I don't do bitcoin loans. My worry would be Bitcoin has never been through a market cycle downturn. The last one we had was 2008. When the Dow goes down 50 percent, how far down will bitcoin go 80 or 90 percent? Be careful and mentally prepare yourself for this scenario. It will happen again and is quite frankly overdue. If you have 50 percent LTV loan, you will be liquidated. Stay humble. Stack sats. Be extremely careful with a bitcoin loan. Hell just work hard and save in Bitcoin. Leave it at that.
Not here to tell folks how to manage their money. But I use tBTC but only a super small portion of my BTC to accumulate BTC faster. Ratio is about 25-35% havenāt had any issues. But Iāve been in the space for over a decade so I feel comfortable with my risk and goals which is stacking more sats.
If you did get margin called, you didnāt use leverage properly and you didnāt use nostr:npub1cn4t4cd78nm900qc2hhqte5aa8c9njm6qkfzw95tszufwcwtcnsq7g3vle team. Capital providers, believe it or not, donāt want early loan repayment risk.
