Borrow fiat with your Bitcoin and never sell

[so98nn]

The capital gains on bitcoin is huge, my country levies taxation around 30% and not only this if you own a business then you have to pay additional 18% export tax on the bitcoin sold against fiat. This is very very layered structure from Indian government so that we can not freely use the bitcoin.

If this continued I am afraid there is no way Indians can get into bitcoin freely unless and until they fly to tax feee country sell the assets there and wire it with fiat to get only capita gains as personal passive income. Idk, but it sucks.

[laurenB7742]

The risk is that if you don't pay the interest, your collateral will also disappear, in which case I would do it the way @Bitcoin_Arena mentioned. I will also sell some bitcoins to cover work expenses, and then I will find a way to buy back those sold bitcoins when I can afford it. The market is still there and the opportunity to own bitcoin has never gone away so there is no need to mortgage assets while we can sell them.

[Cannabijoy]

You are late for this. This is so 2021 what you are saying.

The one who popularized this last year was Michael Saylor, to the point of recommending to people that if you have a paid off house, take a mortgage and buy Bitcoin with the money they give you. Soon other Youtubers jumped on the bandwagon, like Max Kaiser.

I’m not saying use your house as collateral to buy more Bitcoin. I’m saying use your Bitcoin as collateral to obtain more property (specifically investments that will earn you more money).


If you acquire a significant amount of Bitcoin it is much safer to sell or spend small parts than to borrow against it, even if you have to pay capital gains tax. Better to pay tax than to lose your Bitcoin.
[/quote]

If you sell your Bitcoin and have to pay taxes, then you’ve lost your Bitcoin to whoever bought it. So long as you live within your means (which is what a Bitcoin based economy teaches us), wouldn’t it make more sense to keep your Bitcoin and borrow the money?

Those who sold $1,000,000 worth of Bitcoin for $10 in 2011 have lost about 25% of that value. If they borrowed smaller amounts as they needed it (with the means of paying off the loan, and the ability to sell some Bitcoin if times got tough), they would have over $2 billion in Bitcoin.

Yea the trouble is that you will have to hand over Bitcoin to whomever you borrow the FIAT
from, this means you lose control of that Bitcoin and when the value falls you will have to
give them more Bitcoin to cover the value of the FIAT loan, its like a "Margin Call".

Why would you have to hand over your Bitcoin? Perhaps you do now, but I am talking about the future when Bitcoin is more established. You don’t have to move out of your house when you use it as collateral. You only have to prove that you possess the asset that you’re using.

[moderator's note: consecutive posts merged]

[Poker Player]

If you sell your Bitcoin and have to pay taxes, then you’ve lost your Bitcoin to whoever bought it. So long as you live within your means (which is what a Bitcoin based economy teaches us), wouldn’t it make more sense to keep your Bitcoin and borrow the money?

No, it wouldn't. It doesn't actually.

Because in your argument you are obviating the increased purchasing power of Bitcoin, with which it is worth selling to enjoy the benefits while maintaining or even increasing purchasing power.

Stop listening to the snake oil salesman Saylor.

Those who sold $1,000,000 worth of Bitcoin for $10 in 2011 have lost about 25% of that value. If they borrowed smaller amounts as they needed it (with the means of paying off the loan, and the ability to sell some Bitcoin if times got tough), they would have over $2 billion in Bitcoin.

You are cheating yourself.

Like selling $1M for $10? What the **** are you talking about?

It will always be better to sell small pieces than borrow because in order to borrow you will have to deposit at least twice as much, giving up your private keys, and with the volatility of Bitcoin, you will soon receive a margin call.

Why would you have to hand over your Bitcoin? Perhaps you do now, but I am talking about the future when Bitcoin is more established. You don’t have to move out of your house when you use it as collateral. You only have to prove that you possess the asset that you’re using.

Here we are talking about realities, not what you imagine. You have to hand over your Bitcoin in order to borrow.

[Cannabijoy]

If you sell your Bitcoin and have to pay taxes, then you’ve lost your Bitcoin to whoever bought it. So long as you live within your means (which is what a Bitcoin based economy teaches us), wouldn’t it make more sense to keep your Bitcoin and borrow the money?

No, it wouldn't. It doesn't actually.

Because in your argument you are obviating the increased purchasing power of Bitcoin, with which it is worth selling to enjoy the benefits while maintaining or even increasing purchasing power.

Stop listening to the snake oil salesman Saylor.

Those who sold $1,000,000 worth of Bitcoin for $10 in 2011 have lost about 25% of that value. If they borrowed smaller amounts as they needed it (with the means of paying off the loan, and the ability to sell some Bitcoin if times got tough), they would have over $2 billion in Bitcoin.

You are cheating yourself.

Like selling $1M for $10? What the **** are you talking about?

It will always be better to sell small pieces than borrow because in order to delete you will have to deposit at least twice as much, giving up your private keys, and with the volatility of Bitcoin, you will soon receive a margin call.

Sorry, I may have worded that wrong. What I mean is, if I sold 100,000 Bitcoin at $10 a coin in 2011, for a total of $1,000,000, my million dollars would have lost 25% of its purchasing power due to inflation- while the Bitcoin would be worth $2 billion.

[Poker Player]

Sorry, I may have worded that wrong. What I mean is, if I sold 100,000 Bitcoin at $10 a coin in 2011, for a total of $1,000,000, my million dollars would have lost 25% of its purchasing power due to inflation- while the Bitcoin would be worth $2 billion.

Many have had the same idea as you, popularized by the snake oil salesman and have ended up liquidated or with their bitcoin lost or locked in broken exchanges.

At the time I doubt you could borrow against your Bitcoin, but let's assume you could.

Leaving that Bitcoin worth $1M, they would lend you a maximum of 50%, or $0.5M, but it is not convenient to borrow the maximum because at the minimum that the price oscillates a little downwards you would receive a margin call to provide more collateral or you would be liquidated. On that borrowed amount you would have to make periodic payments, which if missed, you would also be liquidated. If the exchange went bankrupt you would be left without your funds.

How much would you have borrowed to have a good margin of safety? $200K? With a downturn like the last few months, you would have received a margin call as well.

That borrow idea is fine if you are a billionaire, have like 10,000 bitcoins, and to finance your lifestyle you only need to borrow against 50 or 500 at most, but not for ordinary people as the snake oil salesman has taken it upon himself to popularize.

[jrrsparkles]

I don’t have enough Bitcoin (yet) to borrow for anything significant, but this is my ultimate plan. When I get enough Bitcoin, I would borrow no more than half its worth (in case the price drops), and then I would still have Bitcoin along with whatever property I buy with the borrowed money.

This seems like a smarter move than to sell the Bitcoin for fiat money. If I sell, then I have to pay capital gains tax. When the cash is borrowed, there is no tax. Since I still have the Bitcoin, then I will gain when the price rises. If I only have fiat, the “price” will always go down because of inflation.

I hope Bitcoin will eventually replace the fiat system, but until then, the market for cash favors borrowers over savers. This seems like a win-win situation.

Does anyone else plan on doing this?

It works theoretically but is it really possible in reality? How you are going to pledge your bitcoin to borrow your fiat, if you give your bitcoin to someone as collateral then it becomes their possession not just only the collateral since we all know that bitcoin transactions are irreversible. 

[kamvreto]

to replace the fiat system is currently not possible, Bitcoin still has pros and cons and price fluctuations will affect the level of risk of using bitcoin. Bitcoin and fiat today still go hand in hand, complement each other and do not replace each other. Borrowing money for long-term investments is not a problem as long as there is a return for the loan. Borrow according to what you need, banks value borrowers more than savers because borrowers will provide many advantages for the bank.

[bitbollo]

it is too risky as a strategy because the price can fluctuate dramatically and make an investment almost like playing in the casino.
if you do not really need cash for an investment you are basically trusting everything to the hope that the price of bitcoin will revalue... otherwise how do you repay your loan?

then ok here we are all bullish and we think that the price of bitcoins always tends to rise over the long term (maybe years or decades), but imagine a big contraction takes place (similar to what we have seen in recent months) ...
practically you risk losing all the bitcoin and keeping yourself with a large fiat debt to repay.

[NotATether]

I dont have enough Bitcoin (yet) to borrow for anything significant, but this is my ultimate plan. When I get enough Bitcoin, I would borrow no more than half its worth (in case the price drops), and then I would still have Bitcoin along with whatever property I buy with the borrowed money.

You are going to trust the economic recession with your borrowed cash?

Sorry to rain on your parade, but the inflations and rising interest coming from the recession megastorm in the next few months are going to wipe out your borrowed cash, and the bitcoin you're borrowing it against (because even more lending platforms will collapse - this time by running out of cash because govts will not bail them out).

Don't throw your hard-earned bitcoins into a funnel, wait until the price gets out of its bearish burrow, and then buy the stuff you want by liquidating parts of your BTC.

[sunsilk]

This is viable if you have other source of income that can support to pay your debt whatever is the market's situation. But I won't do this strategy and I know how it feels hard to sell your bitcoin when you're in need.

Yet, borrowing and using your bitcoin as collateral or you're asking for a loan so that you'll save your bitcoin is going to add your responsibility because of the interest that you'll get.

On the otherhand, it's okay to sell and have it saved on a stablecoin and wait until the price drops so you can buy again.

[fullhdpixel]

The risk is that if you don't pay the interest, your collateral will also disappear, in which case I would do it the way @Bitcoin_Arena mentioned. I will also sell some bitcoins to cover work expenses, and then I will find a way to buy back those sold bitcoins when I can afford it. The market is still there and the opportunity to own bitcoin has never gone away so there is no need to mortgage assets while we can sell them.

Not only the interest that needs to be paid but also the borrowed amount. I think it's also possible to pay for the interest first? I heard it last time, when our neighbour borrow a cash but I heard they pay the interest first. Maybe that can work better so that the next time you pay it will now look smaller and you are motivated to pay it on time.

The only way that your collateral could disappear is when you fail to pay the loan or also called as default. If you bought your bitcoins on a price which is lower than your selling price then its fine to sell it and get some profits but we can always sell whenever there is a good pump. That way we will never run out of cash and there is no need to borrow money anymore.

[ethereumhunter]

to replace the fiat system is currently not possible, Bitcoin still has pros and cons and price fluctuations will affect the level of risk of using bitcoin. Bitcoin and fiat today still go hand in hand, complement each other and do not replace each other. Borrowing money for long-term investments is not a problem as long as there is a return for the loan. Borrow according to what you need, banks value borrowers more than savers because borrowers will provide many advantages for the bank.

As long as we feel we can repay the money we borrowed, we can borrow money from the bank and return the loan money every month. But suppose we are going to use the money to start a business. In that case, we must carefully calculate the risks because a business cannot always provide a profit so we may have difficulty paying the loan. Maybe it would be better to try with the money you have first and keep trying to make a profit so that your capital money can be big and you don't have to borrow money from the bank.

[Agbe]

The whole story is complicated, If I say I understand you that is like. Your story is not straight forward. Are you saying that you want to borrow Fiat with bitcoin? How? If it is like that then you are saying the opposite of the whole thing because it is the Fiat currency you would have borrowed to buy bitcoin not the other way round. By way. Bitcoin is not to replace the Fiat currency system but to use as the assistant/alternative as to the Fiat currency. The quantity of bitcoin is not enough to take over fiat currency system unless if more bitcoins are produce in the ecosystem. And also borrowing money to buy bitcoin as you are interested to do it is not advisable because bitcoin is not a stable coin. Now you borrow  $300 to buy bitcoin as the rate of $20k and bitcoin ironically come down to 17k. What will you do?

As for me, I am not planning to do what you are planning to do.

[AmoreJaz]

This is viable if you have other source of income that can support to pay your debt whatever is the market's situation. But I won't do this strategy and I know how it feels hard to sell your bitcoin when you're in need.

Yet, borrowing and using your bitcoin as collateral or you're asking for a loan so that you'll save your bitcoin is going to add your responsibility because of the interest that you'll get.

On the otherhand, it's okay to sell and have it saved on a stablecoin and wait until the price drops so you can buy again.

whatever the OP is planning here, as you have suggested, much better if the OP has other means so in case of need, he can use it and not touch his satoshis. hard to get a loan and if you are just relying on this as source of funds, more then likely you will be on tight budget and sell it at a loss. this is why it is not a smart move if you are just having your satoshis and no other source of funds to take care of your other expenses.

[Hamphser]

This is viable if you have other source of income that can support to pay your debt whatever is the market's situation. But I won't do this strategy and I know how it feels hard to sell your bitcoin when you're in need.

Yet, borrowing and using your bitcoin as collateral or you're asking for a loan so that you'll save your bitcoin is going to add your responsibility because of the interest that you'll get.

On the otherhand, it's okay to sell and have it saved on a stablecoin and wait until the price drops so you can buy again.

whatever the OP is planning here, much better if you have other means so in case of need, you can use it and not touch your satoshis. hard to get a loan and if you are just relying on this as source of funds, more then likely you will be on tight budget and sell it at a loss.

Proper money management would be the key and never ever consider on putting yourself on higher risk just because you are really that eager with your crypto investment.We know that crypto investment does

really have that chance for you to make big profits in the future but going all in or taking big loans and doesnt have much sufficient source of income then you would really be putting yourself in big trouble.

Always consider the risk factor and act accordingly which you do seem for it to be that will put you into advantage.

[kamvreto]

to replace the fiat system is currently not possible, Bitcoin still has pros and cons and price fluctuations will affect the level of risk of using bitcoin. Bitcoin and fiat today still go hand in hand, complement each other and do not replace each other. Borrowing money for long-term investments is not a problem as long as there is a return for the loan. Borrow according to what you need, banks value borrowers more than savers because borrowers will provide many advantages for the bank.

As long as we feel we can repay the money we borrowed, we can borrow money from the bank and return the loan money every month. But suppose we are going to use the money to start a business. In that case, we must carefully calculate the risks because a business cannot always provide a profit so we may have difficulty paying the loan. Maybe it would be better to try with the money you have first and keep trying to make a profit so that your capital money can be big and you don't have to borrow money from the bank.

if you still have personal money and can be used to trade why not. it's a better choice than having to borrow from the bank. Collecting profits little by little then the capital will be greater. But the most important of all is that trading skills must be really qualified. the average borrower of money in the bank is those who have good trading skills, so that returns will be faster and can be controlled. If you don't have skills, it's better to forget to borrow money at the bank.

[nullius]

Public Service Announcement:

I don’t have enough Bitcoin (yet) to borrow for anything significant, but this is my ultimate plan. When I get enough Bitcoin, I would borrow no more than half its worth (in case the price drops), and then I would still have Bitcoin along with whatever property I buy with the borrowed money.

This seems like a smarter move than to sell the Bitcoin for fiat money. If I sell, then I have to pay capital gains tax. When the cash is borrowed, there is no tax. Since I still have the Bitcoin, then I will gain when the price rises. If I only have fiat, the “price” will always go down because of inflation.

I hope Bitcoin will eventually replace the fiat system, but until then, the market for cash favors borrowers over savers. This seems like a win-win situation.

Does anyone else plan on doing this?

Where that road leads:  Liquidation.

For example, from someone who started out exactly with the oh-so-clever idea that you state in OP—with lower leverage than you think to use, “in case the price drops”:

Now, I want to kill myself... or at least, take up alcoholism as a hobby.

(Someone, please quote me.)

Later, after worse wreckage:

Finding that loose change helped so much:  $48.82 is now a lot of money to me.

My finances have become dollhouse-sized.


Image:  A dollhouse handmade by someone’s grandfather (Dave Parker, 2007).  Surely a mansion, compared to what my scaled-down finances can afford.

A few months ago, as I nurtured my growing BTC long-term savings and a zoo of alts, I was throwing around $10k and $40k chunks of stablecoins.

[...]

I am now the proud owner of 0.0495 BTC plus a handful of sats, with a liquidation price a little bit under $19.2k.  If Bitcoin somehow breaks below $20k, the whole account is so small that I can hold a dollhouse yard sale of miniaturized alt-dust to raise $50; another $50 infusion would push my liquidation price down by >$1,100.  Eventually, I will get around to freeing my itty-bitty dollhouse bitcoins from the encumbering debt of around $853.  Meanwhile, I can hold a dollhouse tea party.

$48.82 is now a lot of money to me.  Finding that loose change helped so much.

[Morosophy]

I don’t think borrowing money keeping your bitcoins as collateral is a good idea, moreover many countries do not yet consider it as a legal tender. The risks are too high. You can wait for some time and then sell the bitcoins once the price increases instead.

[lizarder]

I don’t have enough Bitcoin (yet) to borrow for anything significant, but this is my ultimate plan. When I get enough Bitcoin, I would borrow no more than half its worth (in case the price drops), and then I would still have Bitcoin along with whatever property I buy with the borrowed money.

This seems like a smarter move than to sell the Bitcoin for fiat money. If I sell, then I have to pay capital gains tax. When the cash is borrowed, there is no tax. Since I still have the Bitcoin, then I will gain when the price rises. If I only have fiat, the “price” will always go down because of inflation.

I hope Bitcoin will eventually replace the fiat system, but until then, the market for cash favors borrowers over savers. This seems like a win-win situation.

Does anyone else plan on doing this?

Because the cash market is more likely to have an advantage, if it is lending rather than savers, that's why they are more after that kind of thing, but actually we can also take advantage of bitcoin to get maximum profit.

For example, we can buy bitcoin at a low price, so we can trade until bitcoin goes up at a high price, especially now that market conditions have an opportunity for us to buy and make investment schemes as we want.

The most important thing is that the method we use can generate profits, whether large or small, it really depends on how prepared we are in making investments, be it capital or the long or short-term strategies that we use.