Borrow fiat with your Bitcoin and never sell

[goldkingcoiner]

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?

So let me get this right:

You want to

1. Borrow fiat for half of your Bitcoin as collateral.
2. Pay off the loan by, what, selling Bitcoin profits for x amount of fiat or in the form of x amount of Bitcoin?

So either you are paying tax once you sell for fiat to pay your debt OR you pay in an agreed amount of Bitcoins. And seeing as Bitcoin is going up very nicely, you could actually lose out more on profits than you would have paid on taxes. Unless of course Bitcoin falls. But thats not a bet I would want to take. Because the chances that Bitcoin is going to go past 33% in price is more likely than the opposite. And at that point you lost more than if you paid 33% in taxes.

Don't the rich make money by borrowing fiat to buy property which will then generate turnover (revenue)? That generated turnover is taxed and part of the profit is used to pay back the loan? Once its paid back they can do the same method over again but this time borrow more by using the bought property as additional collateral?

Any turnover is still taxxed. If your property does not generate any profit and you have no fiat to pay them back then they can take your property and your Bitcoin as collateral. Am I missing something?

The same method for borrowing money to buy Bitcoin would generate huge profits.
But first you have to find someone to loan you fiat to buy Bitcoin.

The loan application conversation would go like this:

You : Hi, I want to borrow fiat to buy BTC.
Bank: No. If we were smart enough to understand the potential of Bitcoin, we would have bought it ourselves.

[DoublerHunter]

If you ask me OP I think you didn’t think this through. Let’s say I follow your instructions and decide to borrow Fiat using Bitcoin and at the point of be running the process bitcoin is 20k dollars and that’s I get 20k dollars Fiat. Let’s say at the time of repayment bitcoin goes up to to 30k how would the transaction be, and if who I borrowed the money from is knowledgeable about crypto-currency then it would be a major problem.

^ I think you did not understand as OP said, the BTC here is just collateral, whatever happens to the price still the BTC is the collateral.
Probably the point is, while BTC is at a low price or you know that your BTC will grow more in the future, instead of selling it directly to exchange, just use it as your collateral and borrow fiat which is fiat amount will remain the same as what you borrowed.
However, the problem here is where you will find a service that allows BTC as collateral and make sure it should be trusted.

[Mahanton]

You can do anything with the loan but if there is high rate of interest then there is little worry. If you have passive income investing in something that makes sense. Because you have to pay fixed amount of money against interest. Many people adopt the same approach in the case of Bitcoin and take loans by keeping Bitcoin as an asset. If it is for long time you will get advantage otherwise there is possibility of loss.

When we  do tend to take up some loan then we arent that dumb on not to know on whats the interest.Therefore, if you do see that it is really just high then there's nothing you can do about it
So its a take it or leave it kind of situation of yours to take. There's nothing wrong to take up some loan as long you are responsible  and able to repay those amounts in due time then i dont see
anything wrong with it as long it would be applied to investment but of course dont expect something from it because there's no assurance or sureness that you could make profits on time.

[Cannabijoy]

I had to read it many times to understand what is the point of you making a loan when you already have money that you invested in bitcoin and you can use it? I have a question:

The day you took your money and decided to buy bitcoin, what was your deal with it? your goal was to buy bitcoin and make hodl and never spend that bitcoin and you die without spending the bitcoin? was that your goal? or was your goal to buy bitcoin and hodl until it increased a lot and then you spent it in the real world?

when we make an investment the objective is to make a profit and then we use that profit, and we continue to invest and then we use the profit, always keeping the principal to generate more profit. it makes no sense to make a loan when you could sell a part of your bitcoins and leave another part until you had a big increase to make more profit

My goal is to never sell the Bitcoin, and to leave it to my children after I die. I will teach them about the first principles of money, and why Bitcoin is the greatest, hardest money ever created, so that they never sell it. Their cash can be stolen through inflation, their gold can be stolen by anyone, and their land can be stolen by eminent domain or asset forfeiture. Their Bitcoin can never be stolen, so long as they know how to hodl it.

[Flamous]

Not a wise thing to do as you do not know what will happen to bitcoins in the future.

[popeye95]

I had to read it many times to understand what is the point of you making a loan when you already have money that you invested in bitcoin and you can use it? I have a question:

The day you took your money and decided to buy bitcoin, what was your deal with it? your goal was to buy bitcoin and make hodl and never spend that bitcoin and you die without spending the bitcoin? was that your goal? or was your goal to buy bitcoin and hodl until it increased a lot and then you spent it in the real world?

when we make an investment the objective is to make a profit and then we use that profit, and we continue to invest and then we use the profit, always keeping the principal to generate more profit. it makes no sense to make a loan when you could sell a part of your bitcoins and leave another part until you had a big increase to make more profit

My goal is to never sell the Bitcoin, and to leave it to my children after I die. I will teach them about the first principles of money, and why Bitcoin is the greatest, hardest money ever created, so that they never sell it. Their cash can be stolen through inflation, their gold can be stolen by anyone, and their land can be stolen by eminent domain or asset forfeiture. Their Bitcoin can never be stolen, so long as they know how to hodl it.

I think you need to have a more thoughtful plan than this 'borrow fiat, never sell bitcoin' plan. You know, fiat has the interest rate, and if Bitcoin was under a bear market with price drop every day, you put yourself at risk. Saw how many crypto financials like 3AC, Voyager, Celsius are now under bankruptcy because of hedge funds, lending,... They've expanded a lot when it was a bull market and overestimated themself and can not cover under the bear market.

[Kelvinid]

Does anyone else plan on doing this?

I'm not, and it was not my plan. I keep Bitcoin and also fiat money and that is because Bitcoin is not fully accepted in all areas, not even in my country. Yes, I could say it was not banned in my country but the problem is it was not also accepted as currency. And I was urged to sell them and converted them to fiat money for there is something I could use to buy stuff and other necessities.

I see your idea was good but not really how it works this time, not now - might be possible and it works in the future.

[virasisog]

Does anyone else plan on doing this?

I'm not, and it was not my plan. I keep Bitcoin and also fiat money and that is because Bitcoin is not fully accepted in all areas, not even in my country. Yes, I could say it was not banned in my country but the problem is it was not also accepted as currency. And I was urged to sell them and converted them to fiat money for there is something I could use to buy stuff and other necessities.

I see your idea was good but not really how it works this time, not now - might be possible and it works in the future.

Good idea but isn't a wise move. It will never be advisable to invest in Bitcoin using borrowed funds. We all know how risky crypto investment is and it could only cause you trouble in case you fail in your investment. Borrowing just to have investment capital won't work in the long run. You better save and allocate funds for investment. Bitcoin investment is not as easy as you think because its volatility is unpredictable.

[salad daging]

Good idea but isn't a wise move. It will never be advisable to invest in Bitcoin using borrowed funds. We all know how risky crypto investment is and it could only cause you trouble in case you fail in your investment. Borrowing just to have investment capital won't work in the long run. You better save and allocate funds for investment. Bitcoin investment is not as easy as you think because its volatility is unpredictable.

Precisely for me it's not a good idea to take out a loan with a decent profit while we don't think about how big the risk will be later this also needs to be thought about and what if it happens, so I avoid it.

For me, a loan is not a good thing, especially for crypto investments which are full of high risk when volatility is difficult to predict, this kind of thing is not included in the management I planned, I certainly have to have my own allocation where when I want to have BTC it must be there when the price drops This will not be charged because it has been allocated differently from the loan where we have to return it at the specified time.

[Detritus]

From all I understand in your post, your talking about crypto loan. Selling my Bitcoin again...? No, I would not do that. Crypto loan is a great idea, I have not fully educate my self about this crypto loan but I know binance CEX has the feature where you can take a crypto/fiat loan and deposit another Coin, it could be BTC (your asset) as Collateral (https://www.binance.com/en/loan).
Instead of selling my Bitcoin for a cheap price, I'd rather go for the crypto loan.

[minime0105]

From all I understand in your post, your talking about crypto loan. Selling my Bitcoin again...? No, I would not do that. Crypto loan is a great idea, I have not fully educate my self about this crypto loan but I know binance CEX has the feature where you can take a crypto/fiat loan and deposit another Coin, it could be BTC (your asset) as Collateral (https://www.binance.com/en/loan).
Instead of selling my Bitcoin for a cheap price, I'd rather go for the crypto loan.

The thing it was trying to explain is a cryptocurrency loan as you said but it did not put it well not if you can understand taking loan 4 BTC and convert to Fiat currency it's not really bad idea but it can fall to the head or the person you borrow the money from because Fiat currency value is not really grow like cryptocurrency kind of market appreciation. Because i noticed that cryptocurrency is the way and it value do increase every day

[Ozero]

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?

I don't think this is a good idea. I think that you, speaking of a loan, do not have an interest-free loan, but a loan that must be repaid with decent interest. In your fantasizing, the possibility of returning the borrowed money is not considered at all. And this is the most important thing in your plan. Bitcoin has a high price volatility and it is very risky to take out a loan, relying on the rising price of Bitcoin, since its growth is accompanied by periodic very low and long price drops, as at the present time.
In addition, you should not expect that bitcoin or another cryptocurrency will eventually replace fiat. This will never happen.

[2stout]

This is really playing with house money (gambling) and I highly advise against unless you got an equal part of that borrow in fiat.  Why?  For example, say you borrowed when BTC was $50k and then it dropped to $18k- you would have to deposit some funds so some liquidation against your BTC doesn't happen.  If you fail to do so, then some, if not all, of your BTC could be liquidated to fulfil collateral requirements.

[Silberman]

I had to read it many times to understand what is the point of you making a loan when you already have money that you invested in bitcoin and you can use it? I have a question:

The day you took your money and decided to buy bitcoin, what was your deal with it? your goal was to buy bitcoin and make hodl and never spend that bitcoin and you die without spending the bitcoin? was that your goal? or was your goal to buy bitcoin and hodl until it increased a lot and then you spent it in the real world?

when we make an investment the objective is to make a profit and then we use that profit, and we continue to invest and then we use the profit, always keeping the principal to generate more profit. it makes no sense to make a loan when you could sell a part of your bitcoins and leave another part until you had a big increase to make more profit

The OP is trying to outsmart the system, he is trying to avoid having to sell his coins by using a loan and in this way avoid paying capital gains taxes, now it is true that some whales can do movements like this but I really do not expect that your average investors can actually do something like this, I think that it is better to keep things simple and to not try to do some fancy moves like this one, if we have to sell our coins for some reason then just sell them, because if we were to do something like this and it does not work then the repercussions will be way worse than to pay taxes on our capital gains.

[Lambent]

I think it’s best if you decide to sell a small part of your coin and use that, so you don’t lose and you can still make profit. Borrowing isn’t a good idea, no matter what, but each to their own.

[Cookdata]

I think it’s best if you decide to sell a small part of your coin and use that, so you don’t lose and you can still make profit. Borrowing isn’t a good idea, no matter what, but each to their own.

The two are not a good idea, borrowing without proper calculation and selling a portion of your bitcoin is not a good idea either.
One of the major problems of Loan is Liquidation management, if you take a portion that is bigger than your collateral, you will receive a call to top it when the price is dropping and if your collateral get to a point where it can no longer settle your loan, they will be forced to close it. The best way to always use your coin as collateral for loans is when the price is pumping or take a little loan with over collaterized bitcoins, so you don't get margin calls when you are not ready to settle your debts.

Selling your coins is also not a good option, if you sell them at low prices, you may never have the opportunity to enter them again and will have to pay multiple times the initial price amount you sold. However, if you are in need of money and have no other options, please sell and solve your problems, bitcoin will not run, and you can always optin again and again.

[ethereumhunter]

I think it’s best if you decide to sell a small part of your coin and use that, so you don’t lose and you can still make profit. Borrowing isn’t a good idea, no matter what, but each to their own.

If you can trade, maybe borrowing money is a good idea because you can use it to trade and try to make a profit so you can repay the loan later. But if you are borrowing just to buy bitcoins, you have to think about how to repay the loan because the bitcoin market is very volatile and there is no guarantee that you will make a profit when it is time to repay the loan. So you should be careful if you want to borrow money and consider the risks.

[Solosanz]

If you can trade, maybe borrowing money is a good idea because you can use it to trade and try to make a profit so you can repay the loan later. But if you are borrowing just to buy bitcoins, you have to think about how to repay the loan because the bitcoin market is very volatile and there is no guarantee that you will make a profit when it is time to repay the loan. So you should be careful if you want to borrow money and consider the risks.

I'd say borrowing money to invest on Bitcoin is safer than borrowing money to trade because trading has more higher risk to lose your money while investment, you're only need to wait until Bitcoin cross to bullish season. Based on the history, you need to wait at least 4 years to get good profit, so if you can calculate how much the interest you will pay after 4 years and predict how much the Bitcoin price after 4 years, it will be good.

Trading you're against the market and other traders who want to make a profit, it's really hard.

[ethereumhunter]

If you can trade, maybe borrowing money is a good idea because you can use it to trade and try to make a profit so you can repay the loan later. But if you are borrowing just to buy bitcoins, you have to think about how to repay the loan because the bitcoin market is very volatile and there is no guarantee that you will make a profit when it is time to repay the loan. So you should be careful if you want to borrow money and consider the risks.

I'd say borrowing money to invest on Bitcoin is safer than borrowing money to trade because trading has more higher risk to lose your money while investment, you're only need to wait until Bitcoin cross to bullish season. Based on the history, you need to wait at least 4 years to get good profit, so if you can calculate how much the interest you will pay after 4 years and predict how much the Bitcoin price after 4 years, it will be good.

Trading you're against the market and other traders who want to make a profit, it's really hard.

Indeed, there will be about 4 years before the crypto moves into a bullish season. But in those 4 years, there will be ups and downs that will frequently happen so you can profit from trading. That is why you should be able to analyze well before starting to trade to make a profit. It may be difficult at first but if you keep learning to analyze, you will be able to trade well. What you have to think about is how you pay off the loan money, especially if you don't have an income every month.

[naira]

snip~

Indeed, there will be about 4 years before the crypto moves into a bullish season. But in those 4 years, there will be ups and downs that will frequently happen so you can profit from trading. That is why you should be able to analyze well before starting to trade to make a profit. It may be difficult at first but if you keep learning to analyze, you will be able to trade well. What you have to think about is how you pay off the loan money, especially if you don't have an income every month.

Say borrowing money has to be repaid every month while borrowing to trade crypto is quite risky when you are not a really reliable trader. I don't recommend borrowing money to trade crypto, because I personally experienced it. An experience where I have done both options, namely borrow to trade crypto and borrow to invest. But if there is no interest on the loan, then you are not required to pay per month then you can invest. However, are there institutions that lend money without interest? certainly not !! because the borrowed money must continue to flow. Unless you borrow money from a rich relative and he doesn't demand you pay monthly.

I dare say that because of experiencing both options as I said. As a result, I borrowed about $1000 from my brother to buy Bitcoin ($6100) if I'm not mistaken in 2020 in March and it didn't take 4 years to release it because one year later it was bullish at around $58000. Again that doesn't mean it's effective for everyone, it's just that if you have enough money in savings to buy a few sats then never borrow.