Library21 on Nostr: 812,460 Topic: Bitcoin collateralized loans Format: informal notes — Bitcoin is the ...
812,460
Topic: Bitcoin collateralized loans
Format: informal notes
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Bitcoin is the reserve asset of the internet economy
The internet economy is an aggregate economy of the entire world and is larger than any single nation economy
Bitcoin is pristine digital collateral for lending
Pristine meaning: Not spoiled, corrupted or polluted
Collateral: something pledged as security for repayment of a loan, to be forfeited in the event of a default
Collateral is something provided to a lender as a guarantee of repayment. It is used to secure a loan
Collateral reduces risk for lenders because if a borrower defaults on the loan, the lender can seize and liquidate the collateral
People who own Bitcoin will have access to the best interest rates
Bitcoin is the apex collateral in a digital world (largely because to it’s unmatched liquidity)
Bitcoin is replacing treasuries as the apex reserve collateral
Why is a Bitcoin collateralized loan a useful product? It is a tool to help individuals or companies avoid ever selling their Bitcoin
By borrowing against your Bitcoin instead of selling it, you:
- Eliminate capital gains taxes (Bitcoin is considered property, therefore a taxable event is created everytime you sell or exchange it)
- Continue to benefit from the price appreciation of bitcoin
- Can write off the interest expense of the loan
Areas to research:
- Dynamically refinanced loans (monthly)
- Counterparty risk of different bitcoin backed loan products
- Rehypothecation considerations
Loan-to-value ratio (LTV): The maximum amount of a secured loan based on the market value of the asset pledged as collateral
A low LTV (conservative) provides protection from liquidation in case the underlying asset has a significant drawdown in price
Bitcoin backed loan products to review: LEDN, SALT lending, Unchained capital, Coinbase
Factors to consider: custody risk, rehypothecation, insurance, origination fees, interest rate, Loan to value (LTV), collateral to principal (CTP), prepayment penalties, tax implications, loan maturity options
Topic: Bitcoin collateralized loans
Format: informal notes
—
Bitcoin is the reserve asset of the internet economy
The internet economy is an aggregate economy of the entire world and is larger than any single nation economy
Bitcoin is pristine digital collateral for lending
Pristine meaning: Not spoiled, corrupted or polluted
Collateral: something pledged as security for repayment of a loan, to be forfeited in the event of a default
Collateral is something provided to a lender as a guarantee of repayment. It is used to secure a loan
Collateral reduces risk for lenders because if a borrower defaults on the loan, the lender can seize and liquidate the collateral
People who own Bitcoin will have access to the best interest rates
Bitcoin is the apex collateral in a digital world (largely because to it’s unmatched liquidity)
Bitcoin is replacing treasuries as the apex reserve collateral
Why is a Bitcoin collateralized loan a useful product? It is a tool to help individuals or companies avoid ever selling their Bitcoin
By borrowing against your Bitcoin instead of selling it, you:
- Eliminate capital gains taxes (Bitcoin is considered property, therefore a taxable event is created everytime you sell or exchange it)
- Continue to benefit from the price appreciation of bitcoin
- Can write off the interest expense of the loan
Areas to research:
- Dynamically refinanced loans (monthly)
- Counterparty risk of different bitcoin backed loan products
- Rehypothecation considerations
Loan-to-value ratio (LTV): The maximum amount of a secured loan based on the market value of the asset pledged as collateral
A low LTV (conservative) provides protection from liquidation in case the underlying asset has a significant drawdown in price
Bitcoin backed loan products to review: LEDN, SALT lending, Unchained capital, Coinbase
Factors to consider: custody risk, rehypothecation, insurance, origination fees, interest rate, Loan to value (LTV), collateral to principal (CTP), prepayment penalties, tax implications, loan maturity options