What do you think about borrowing against your bitcoin?

[Poker Player]

I do not like debt.

I think a lot of the financial problems the world is dragging down come in large part from debt. The over-indebtedness of people, of states, of companies. Money is created as debt. At first it was mortgages and personal loans, then credit cards, but today you can finance practically everything.

I've been hearing the idea that selling your Bitcoin to take (some) profits is stupid. That it would be better to borrow against it and let it keep growing. I heard this from Saylor a Max Keiser. If you really believe that Bitcoin is going to keep growing, that it's going to reach $1M or more, why are you going to sell it at $50k?

The idea would be to borrow using the Bitcoin as collateral, and refinance as the price continues to rise. That way you don't sell your Bitcoin and you don't pay taxes, income tax or capital gains.It should be done with a low debt ratio, which will allow you to weather a bear market storm for a couple of years.

I do not see it clearly, I understand that in general the best you can do is to avoid debt and increase your net worth, and you can only sell partially when the price reaches certain milestones. For example, you sell 25% when the price reaches $100k, another 25% when it reaches $250k, and so on.

I don't like the idea they propose either, because if it were to become generalized, bitcoin would be encouraging the very thing it proposes to flee from: bitcoin is an alternative to money as debt and encouraging massive indebtedness by taking bitcoin as collateral seems paradoxical, to say the least.

I'd like to know what you think about it.

[ChiBitCTy]

I do not think this is a good idea either and I'm pretty neither of those guys you listed out are financial advisors of any kind, and have tons of money and so it's pretty easy for them to say things like that.  The truth is there is no guarantee of anything.. how do we know bitcoin won't go in to a major crash and bear market territory for the next year or two? We don't.  Yes personally I believe at minimum we are going to see a 100k bitcoin in the somewhat near future, but I think gambling like that, potentially wasting your money ..not for me. 

A lot of people used to use credit cards as their margin account, and that back fired for many users..this is the same principle.

[BIT-BENDER]

It's really won't be easy if the person you are using Bitcoin as collateral is nimble with Bitcoin, the loaner would require the bitcoin of that amount as same as when you want to repay it, let's say it's 0.05BTC then if Bitcoin increase in dollars that's an increase in the collateral because you would repay same 0.05BTC and the value is different from when agreement, this is also a Gamble but who ever does this is a believes the future is Bitcoin because Bitcoin can also reduce in value.

[Findingnemo]

Giving bitcoin as collateral to get the fiat money doesn't look like a great idea, you are expecting it to grow meanwhile you are paying your interest but what if the price of BTC gets crashed? Lender will ask for more BTC for sure or they will never accept it as valid collateral to get finance. First of all understand that if you are going to pay interest rates then it will be too hard to see any returns so saving money is the only smart choice whether it is fiat or bitcoin.

[iamsheikhadil]

Well, if I had Bitcoin, and if I believed that Bitcoin will one day reach $1 million, I would never take loan against it wither, because whatever small the interest of loan be, is actually my loss, when I can simply avoid that by just holding my Bitcoin and crypto assets instead of giving it to another lender or lending business then take fiat and then use fiat for use and repay back the loan. Secondly, if I would be borrowing fiat against my crypto, obviously I would must be having some source of income to pay off that debt with interest so that I can have my whole crypto back, so why wouldn't I just use that fiat income to meet my needs and let my crypto hibernate as I hold!?!

[Sterbens]

Well, if I had Bitcoin, and if I believed that Bitcoin will one day reach $1 million, I would never take loan against it wither, because whatever small the interest of loan be, is actually my loss, when I can simply avoid that by just holding my Bitcoin and crypto assets instead of giving it to another lender or lending business then take fiat and then use fiat for use and repay back the loan. Secondly, if I would be borrowing fiat against my crypto, obviously I would must be having some source of income to pay off that debt with interest so that I can have my whole crypto back, so why wouldn't I just use that fiat income to meet my needs and let my crypto hibernate as I hold!?!

Well, the point is there is a calculation when to borrow, but I will not do it for any reason. plus the interest per month will burden us. automatically pay 2x the loan amount, won't this be stressful for us. to avoid borrowing and believe that bitcoin will touch $ 1 million. gradually it will happen.

[fiulpro]

Borrowing against anything is a Risk.
When you think about borrowing against your Bitcoins it becomes a lot worse. Here are my following assumptions:

1. Let us say that you borrowed when the price of the Bitcoins were x , the company seized a part of your Bitcoins as a safe keep now suddenly you wake up and see that the price is 3x. Would you call them and ask for it back ? Would they give it back ? No
Some companies do not require seizing the asset but what IF ! The company itself blocks you from selling those Bitcoins since you borrowed against then in the first place.

If I do own Bitcoins I would never let anyone take a hold of them in the first place!! They are yours , even if the hold is just the legal name listed in the contracts for debt.

2. The pre-qualification if taking the loan would be amazingly weird, high, unacceptable since you would take loan from a centralized body. Would you accept it ? It is indeed a very complicated thing when you consider Bitcoins. I woke trade them , maybe hold them but would not borrow against them , just my personal opinion because I do consider my Bitcoins to be **Money** and **investment** both which is far too valuable than fiat.

[sunsilk]

They're selling out something that you might be at regret if ever you'll try it out. Why would you borrow your own bitcoin if you're the own holding it? with the idea, you're going to put it as a collateral and will take the cash. You're just adding burden to yourself.

Taking profits is essential for everyone and you can do it at any time that you want and at any price that bitcoin will have. You can sell in batches just as the example you've given and put aside a quantity of bitcoin that you'll hold until it reaches $100k or $1M.

[sheenshane]

If you're the kind of person that willing to face the possible risk, then you're good to go on that strategy of having fiat and borrowing fiat against your Bitcoin.  It depends on me about the situation, if I probably badly need the money and didn't have a choice, it might I will grab the opportunity while I have collateral.  

This seems like gambling, either you will gain profit when upon borrowing or it will have bigger losses because the more days you didn't pay the interest and the more interest rate might the more chances that the interest payments will increase.  If interest rates went up by 3% or 5%, could you still afford the repayments?

But mostly it will end up selling my Bitcoin if I have badly needed money even though what will happen the price and I think, it isn't a good idea to take a loan against your Bitcoin.

[Febo]

What if BTC goes to zero? There is no grantee it will not be worth zero. There can be hidden infatuation and everyone got afraid there are more and they stop believe in Bitcoin. Bitcoin can have a fundamental unsolvable  flaw and some other coin takes his place. There are many other catastrophic scenarios. Chance for Bitcoin to go to zero is not zero. But it is something and you have to hedge against that chance.  Dr. Kim made a good video about it. Prospect Theory: https://youtu.be/REC5V7d3pqM?t=2165   About how we see this small chance as non existent same as the high chance as sure. And that can be a fatal mistake.

[skarais]

Personally I don't like this idea, but maybe someone can still agree with you. I wouldn't use bitcoin as collateral to ask for a loan from a platform or someone in fiat just because I didn't want to sell it. I prefer to manage my bitcoin on my own without giving anyone control over the asset I own. Placing it as collateral may be very risky given the market fluctuation non-stop over time. Ok, if the price can still go up 2-3 times, but what if the price goes down 2-3 times ? With a different price from before, of course, this is a loss that must be accepted by the borrower.

[Theb]

I've been hearing the idea that selling your Bitcoin to take (some) profits is stupid.

If they are calling people "stupid" by shorting or participating in a short of Bitcoin then you can count me as one of the stupid people in the market right now. Unlike your idea on increasing your debt just to add more position on Bitcoin I think shorting or just simply taking advantage of the price drop when you have your exit plan is more efficient and is a good way of maximizing the capital you already own. Selling your position when it is falling down or is about to fall down is the best way to take profit and at the same time buy it back again at a discounted price.

The idea would be to borrow using the Bitcoin as collateral, and refinance as the price continues to rise. That way you don't sell your Bitcoin and you don't pay taxes, income tax or capital gains.It should be done with a low debt ratio, which will allow you to weather a bear market storm for a couple of years.

This will work if you are looking at Bitcoin in the long-run but I don't know how exactly this loan will workout for you since you will definitely have a given period on when you need to pay it out and that is what you need to take in mind. Compared to observing the market and taking advantage of the price drops this for me is more riskier as not only you have a pressure coming from the market but also you have the pressure from your debt.

[slapper]

Borrowing definitely is not a good idea at all. However, with regard to bitcoin, we have to change our minds. As long as you understand your money management and the risk involved, I believe we have the capability to earn more money from loans by using bitcoin as collateral.

There is another way to enhance your profit: leverage. Many exchanges offer leverage as a tool for us to have better profits. An x2 leverage can give you a really big amount of money.

Still, each person can have their own opinion on this issue. Lets ones choose himself the best way for his profit

[Poker Player]

Borrowing against anything is a Risk.

I'm glad that so far the posts agree with what I think. Debt involves risk, and we don't know for sure what will happen in the future. Even if we are very clear that Bitcoin has a promising future, that in the long term it will go up a lot etc., the best thing to do is not to get into debt and if necessary sell small portions or other strategies to avoid debt.

[The Sceptical Chymist]

A lot of people used to use credit cards as their margin account, and that back fired for many users..this is the same principle.

Yeah, but credit cards tend to have outrageously high interest rates.  If you could use bitcoin as collateral for a bank loan, you could probably get a much better rate--but finding a bank (or any other lending institution) willing to accept crypto as collateral might be a problem. 

And imagine that the bitcoin collateral you put up for the loan suddenly drops 25-50%.  You're probably going to have to put up more collateral, much like a margin call.  And seeing as bitcoin is one of the most volatile investments in existence, a drop like that certainly could happen--and quick, too.

If you've got a bunch of bitcoin but need a loan, something's wrong there.  Situations like that make me think the person over-invested in bitcoin and didn't keep enough of a cash reserve on hand.  I'm sure that's happening a lot lately, given how high bitcoin has climbed.

[just_Alice]

Likewise, I think people should move away from debts - not head for it. I find the idea of using Bitcoin as collateral very risky, also, I can't imagine what kind of organization would accept it. What if Bitcoin keeps dropping and there'll be no end to it? Anything can happen, and then what?
If these kinds of practices become popular it might lead to a serious crisis! It's bad enough that people take loans not exactly knowing how and when will they return their debt, and we all remember how the mortgage system overuse ended...
But if there were debts with collateral as volatile as Bitcoin - it would be a disaster.

[yhiaali3]

I also do not encourage this idea, I hate the idea of borrowing in general, so I will never think of taking bitcoin in the form of debt, do not forget that you must return the debt that you took in addition to the interest owed on this amount, so it does not seem like a good idea to me I prefer to buy Direct and investment rather than borrowing.

[dothebeats]

I guess most of us here agree that debt are traps that are just burdens in our backs lest we use it into something that will create more money. Personally, I think borrowing is acceptable only if you have a plan to repay it, and you use the money into something that will generate more money (and one that has low risk, and is mostly guaranteed to succeed). If you are to borrow fiat and use bitcoin as a collateral, that's one of the most stupidest call given bitcoin's volatility. Unless it's clearly defined in the terms that the price of the collateral at the time of the deal remains constant no matter what happens, perhaps I will think about it, but if not, then it's a no for me.

Also what Max Keiser and Michael Saylor are stating is trying to game the volatility of bitcoin in your favor. Most businessmen tend to think like this: maximizing the usefulness of a certain asset on their favor. I go against this, especially since it promotes debt even if bitcoin is poised for fruitful gains in the coming years. There's just too much risk still.

[Poker Player]

If you've got a bunch of bitcoin but need a loan, something's wrong there.  Situations like that make me think the person over-invested in bitcoin and didn't keep enough of a cash reserve on hand.

Well it's not that they have so little cash that they can't even buy groceries. I think in general consider they cash as junk that constantly loses value and that the less you have the better. But yes, they have little cash.

In my case I think it's okay to have a certain amount of cash for the short term. It is true that it is deflationary and that the speed of money printing has accelerated in the last year, but we are still far from hyperinflation like in Venezuela or the Weimar Republic.

Another point to consider here is that I think everyone in the thread has spoken out against getting into debt, but it is very common for large companies or very wealthy people to do so, even when they could pay in cash. See for example Mark Zuckerberg:

"Even billionaires like Zuckerberg have mortgages. Zuckerberg refinanced his $5.95 million Palo Alto, California, estate in 2012 into a 30-year adjustable rate mortgage at an interest rate of just 1.05%. Zuckerberg can clearly afford to just pay cash for any property he wants."

Source: "Why Get a Mortgage if You Can Pay Cash?"

In this case, the reason is twofold: tax reasons and the fact that inflation is above 1%, so borrowing at 1% is making you money, but as we said before that implies risk.

I think this only makes sense to do if your wealth is much higher than the loan you are borrowing, so the risk is very low. If things go bad, there is a downturn in the market, etc. you can pay off the debt without any problems, and I would apply the same to borrowing with Bitcoin.

[ethereumhunter]

I do not like debt.

I think a lot of the financial problems the world is dragging down come in large part from debt. The over-indebtedness of people, of states, of companies. Money is created as debt. At first it was mortgages and personal loans, then credit cards, but today you can finance practically everything.

I've been hearing the idea that selling your Bitcoin to take (some) profits is stupid. That it would be better to borrow against it and let it keep growing. I heard this from Saylor a Max Keiser. If you really believe that Bitcoin is going to keep growing, that it's going to reach $1M or more, why are you going to sell it at $50k?

The idea would be to borrow using the Bitcoin as collateral, and refinance as the price continues to rise. That way you don't sell your Bitcoin and you don't pay taxes, income tax or capital gains.It should be done with a low debt ratio, which will allow you to weather a bear market storm for a couple of years.

I do not see it clearly, I understand that in general the best you can do is to avoid debt and increase your net worth, and you can only sell partially when the price reaches certain milestones. For example, you sell 25% when the price reaches $100k, another 25% when it reaches $250k, and so on.

I don't like the idea they propose either, because if it were to become generalized, bitcoin would be encouraging the very thing it proposes to flee from: bitcoin is an alternative to money as debt and encouraging massive indebtedness by taking bitcoin as collateral seems paradoxical, to say the least.

I'd like to know what you think about it.

I am sure we have our own way to increase the bitcoin amount that we have. But borrowing money just for buying bitcoin will not be recommended, especially if you do not have another income source to pay that loan. Even if you have other income, you should think about your monthly expenses before deciding to borrow money.

I suggest you sell your bitcoin at a high price and buy back again when it is down, so you can increase the bitcoin amount you have while you can take profit from selling your bitcoin. 

I do not like to borrow money, even for my daily needs, because that can make me in trouble.