BTC lending is getting interesting

[Y3shot]

I have never borrowed against my BTC, but I think I can. I've not been in a situation where I need collateral to take a loan, but if I ever do, I can use my Bitcoin.
There is nothing to lose. Worst case scenario, if I can't pay back the loan, the person takes the Bitcoin, which would be the same situation if I had sold my Bitcoin.
Besides, if I need to take such a loan, it would be a long term loan, and it would be a loan where the money would be used to do something productive. It wouldn't make sense to take such a loan for consumption.

I'm aware of loans in exchange for Bitcoin hodling, but I don't really know how it works, if the Bitcoin will be transferred to their address or if the private keys will be handed to them. Bitcoin is very precious; I don't think I can use my Bitcoin as collateral for a loan. There are other ways loans can be obtained; maybe I will think about the next option for how I can get one. This can even make some people not work hard to pay back the loan; it can make one feel relaxed, which can lead to just giving up and ending up paying the loan with the Bitcoin they have since it is with them.

[Emitdama]

One thing I’ve been wondering about lately:

If you’re holding BTC for the long term but suddenly need liquidity, selling it feels like you are about to lose your position and might never get it back at that price before you buy back in.

Borrowing against it makes more sense in theory, you get to keep the BTC, access liquidity, repay the loan, get your BTC back.

But the tricky part is doing this without introducing unnecessary custodians, bridges or wrapped BTC.

If native BTC can eventually be used as collateral while staying on Bitcoin, that could open up a pretty interesting lending market.

Would you personally borrow against BTC you plan to hold long term, or would you rather just sell a small portion?

I understand the attraction of borrowing against BTC, but I think using bitcoin as a collateral comes with a serious high risks that shouldn’t be overlooked. Bitcoin is highly volatile, and we can’t say it less. If bitcoin drops sharply, the lender will want to require more collateral or liquidate your BTC. And you may later end up losing the bitcoin you were trying to to avoid selling, especially during a market crash.

For me, if i urgently needed liquidity, i would prefer selling a fraction of my bitcoin than taking a debt again my asset that can actually move 20-30% or even more in a short period of time. Selling a fraction of it would give up some bitcoin exposure, but also remove the risk of interest, liquidation and being forced to sell at a bad price. Bitcoin may just be excellent as a long term asset but not collateral for debt.

I was also thinking about the same thing but just a bit differently. I wonder how borrowing money against Bitcoin is going to work considering Bitcoin is a volatile asset and it can either go up or down depending on market conditions, and in both of these conditions, there can be either problems for the lender or the borrower. For example, if you have $10k worth of bitcoins, you give them to someone and take $10k from them, but later the price drops and they only have $7k worth of bitcoins left, and now they fear if the lender doesn't return the money, they will never get the same amount back unless they keep holding until Bitcoin recovers.

On the other hand, if the price goes up instead of going down, the lender can simply sell the bitcoins and keep the funds without waiting for the borrower to repay the loan because they will now be getting a larger amount because they gave away $10k, and now the bitcoins that he has a collateral are worth $15k. So for all these things to work properly and to make sure that both parties keep their words and there are no disputes, there has to be an intermediary or some sort of a system that will make sure nothing of this sort happens.

[Darker45]

Bitcoin will never be used as a collateral because of its high volatile nature, using Bitcoin as a collateral will cause serious uncertainty for the lender and the loanee.

Bitcoin has long been used as a collateral for a loan. Coinbase accepts it. If I'm not mistaken, even JPMorgan accepts Bitcoin as collateral. Even here on the forum, I'm sure lenders would take pleasure in accepting it as collateral. I myself would be more than willing to take it as collateral provided I can afford the loan amount.

The lender is well-protected. Your loan amount would be much lower than the value of your collateral (LTV). Furthermore, the liquidation point would be a percentage significantly lower than the value of your Bitcoin. In which case, volatility isn't only a non-issue, it's even a friend to the lender.

Anyway, I don't think there's a Bitcoin lending arrangement that's guaranteed safe.

[ImGenius]

Bitcoin will never be used as a collateral because of its high volatile nature, using Bitcoin as a collateral will cause serious uncertainty for the lender and the loanee.
Rather than all this complications if you need money urgently and don't want to touch into your Bitcoin why don't you just get a loan normally without ever bringing your Bitcoin into play.

Bitcoin is already used as collateral on many platforms. It is true that because of volatility Bitcoin collateral becomes much riskier to avoid the risk the borrowing amount must definitely be much lower in my opinion only 40% of Bitcoins worth should be taken as loan if more than this is taken and the price of Bitcoin falls a lot then there may be a problem with liquidity. Because the amount is low it may be that the problem for which they are borrowing will not be solved then definitely they will have to sell Bitcoin and complete the work.

[Popkon6]

If I invest in Bitcoin, I will hold it for a long time, I can never hold Bitcoin temporarily at my own will. Because Bitcoin is only compatible with long-term investment, in this you should use as much money as you can invest and be calm at the moment. You should not be aggressive in Bitcoin investment, otherwise your Bitcoin investment may be more likely to be in danger.

Would you personally borrow against BTC you plan to hold long term, or would you rather just sell a small portion?

Why should I decide to sell my Bitcoin investment? Because I have formed an emergency fund along with my Bitcoin investment. If I need to, I can use the emergency fund to deal with external threats. Those who do not use emergency funds to sustain their Bitcoin investment for a long time are the ones who face danger in the middle of their Bitcoin investment and are forced to sell. Therefore, you must use an emergency fund to sustain your Bitcoin investment for a long time.

[Lucius]

~snip~
Would you personally borrow against BTC you plan to hold long term, or would you rather just sell a small portion?

How many of those lending services have collapsed, leaving many users with nothing? Bitcoin only makes sense if you treat it in a way that you keep your private keys in a non-custodial wallet, everything else is gambling.

I will always choose the "sell if you need the money" option, and then reinvest at the first opportunity—that is far safer than any other option.

[TedMosby]

Yeah, taking a Bitcoin backed loan seems interesting, not only when you need instant liquidity to fulfill your needs, but also to make money from it too. For example, you take a Bitcoin backed loan to acquire more BTC. If I am not mistaken, this is also what Michael Saylor did before, before he switched to different models like Convertible Bonds and other additional strategies.

Been there, done that, but only did it on an exchange to see if it works and is profitable. But due to skill issues and lack of knowledge, it turned into a loss for me. Should have taken loans when it was still a bear market, at the bottom. Probably this period of time is a good time to take a Bitcoin backed loan to make money. Who knows.

And again, every time I read about Bitcoin backed loans, it keeps reminding me of Babylon. Not shilling it, I myself never tried it yet. Seeing the amount of staked BTC through Babylon, 41,124.67 BTC, I wonder if there's anyone here that actually uses it too.

Receive rewards by locking bitcoin in a technically secure way to help validate other blockchains. No wrapping, no pegging, no bridging to another network, and it all happens within your own wallet.

[Z-tight]

I'm aware of loans in exchange for Bitcoin hodling, but I don't really know how it works, if the Bitcoin will be transferred to their address or if the private keys will be handed to them.

It is simple, you send the lending service offering this loan the BTC required to access the loan you're seeking. I've never borrowed against my BTC, but common sense simply tells me that they would never ask for your keys, you'll just have to send them your collateral, which is BTC in this case.

This can even make some people not work hard to pay back the loan; it can make one feel relaxed, which can lead to just giving up and ending up paying the loan with the Bitcoin they have since it is with them.

And why would anyone want to do that. It is just like any other loan, if you fail to pay, your creditor liquidates the collateral. However, i don't see how it being BTC would make one lose interest to pay and then lose their coins, which is what they were avoiding in the first place when they decided to borrow against BTC.

[bangjoe]

I'd just sell a small portion of it rather than to borrow against it. The interest that I have to pay is just the same as buying it back after selling a small portion. While that makes me free from the obligation, I have no pressure against the lenders and there's no certain time table of when I might take back those small portions that I was able to sell. And that's why if there will be the time that I need, I'll choose to sell.

Hmm, that is an interesting point. If I have to pay interest over the borrowed amount, better to sell BTC without having that "extra prejudice" over finances. Unless we are talking about a bullish season, it must not be that risky to sell BTC and then purchase it again some time later for similar prices or even cheaper prices, considering it might be a bearish season. To take loans should be also the last alternative to be taken into consideration, due to the fees and interest involved.

I am an old man who does not like to owe anyone, so if I am in the same position I am better off selling a little bit of my BTC than I borrow and have to pay interest from the loan, regardless if it is in a bull or bearish market, because the conditions in the state of having debts are annoying, I always feel there is a pursuit of obligations that I have to pay that I do not even know when I get money again.
But if the condition is I know I will get money, than I pledge the BTC I have, or sell it I will definitely look for an easier alternative such as borrowing to friends or to family that I think is much better and easier for my current environment, take your coffee and enjoy it.

Don't pledge your BTC to anyone just to get less money than your assets.

[hd49728]

I am an old man who does not like to owe anyone, so if I am in the same position I am better off selling a little bit of my BTC than I borrow and have to pay interest from the loan, regardless if it is in a bull or bearish market, because the conditions in the state of having debts are annoying, I always feel there is a pursuit of obligations that I have to pay that I do not even know when I get money again.

Loans mean extra cost in loan interest repayment and during your loan time, you will have pressure from that loan interest repayment. It does not make your life better, but only make it more stressful unnecessarily.

It's a clear risk but if during your loan time, your finance becomes worse like losing your job or have emergencies that need money or big money to spend, your loan position will become very worse, even unable to repay. You will even have to borrow more money with higher interest rates, and it's start of something like financial nightmare.

Having debts financially and psychologically is never comfortable and I think and act similarly like you do.

[Solodoski]

One thing I’ve been wondering about lately:

If you’re holding BTC for the long term but suddenly need liquidity, selling it feels like you are about to lose your position and might never get it back at that price before you buy back in.

Borrowing against it makes more sense in theory, you get to keep the BTC, access liquidity, repay the loan, get your BTC back.

But the tricky part is doing this without introducing unnecessary custodians, bridges or wrapped BTC.

If native BTC can eventually be used as collateral while staying on Bitcoin, that could open up a pretty interesting lending market.

Would you personally borrow against BTC you plan to hold long term, or would you rather just sell a small portion?

I don't think it's advisable to use your BTC as collateral for taking loan, although I don't it's even possible to use it as a form of collateral. Firstly I think the volatile nature of bitcoin will  ot allow people want to hold it as collateral,  because it's risky to Leander and the loanee, so I don't think anyone will want to take such risk. If I am trying to hold bitcoin for a long term and I need cash, I will rather sell some of my bitcoin or i get a loan, that does not involve my bitcoin. I think that's the best thing to do than even thinking of using my bitcoin as collateral.

[Rabata]

Would you personally borrow against BTC you plan to hold long term, or would you rather just sell a small portion?

Taking a loan to hold Bitcoin can be good in some cases and it can also be a cause of loss. It will depend on the financial capacity and situation of the person taking the loan. Naturally, the first thing to be emphasized is that Bitcoin is a volatile currency, where there can be both a rise and a fall in a short period of time. Therefore, it is definitely not logical to take a loan based on such an unstable currency. We know that if Bitcoin can be held for a long time, the chances of profit are high, but if the situation goes bad if you take a loan based on that uncertainty, then the borrower can definitely face big problems. If the borrower can repay the loan from any source other than Bitcoin investment, it is good for him and if he cannot, then he should sell a small portion of his holding and fulfill his mandatory work.

[Asuspawer09]

One thing I’ve been wondering about lately:

If you’re holding BTC for the long term but suddenly need liquidity, selling it feels like you are about to lose your position and might never get it back at that price before you buy back in.

Borrowing against it makes more sense in theory, you get to keep the BTC, access liquidity, repay the loan, get your BTC back.

But the tricky part is doing this without introducing unnecessary custodians, bridges or wrapped BTC.

If native BTC can eventually be used as collateral while staying on Bitcoin, that could open up a pretty interesting lending market.

Would you personally borrow against BTC you plan to hold long term, or would you rather just sell a small portion?

That is interesting I mean that could make a lot of sense in different perspective, if you are going to ask me I might probably take that loan if Im on a tough situation as long as someone is willing to lend me or some platforms are offering it as long as the interest is manageable it is going to be useful in my opinion as long as you know what you are doing and you are doing spending anything.

I mean your not really spending the money if you know how to control the your stop lose there was no way that you are going to easily liquidated, unless you are aiming for a high profit and holding on a very low stop lose or no stop lose at all, but this method might work since you are just doing to hold the position of trade.

Technically your just make the loan for the emergency that you needed and then pay it up when you need the money, unless you don't have any intention of paying your loan then that is going to be a problem for sure.

[Mr_Brilliant$]

I think when they borrow against your BTC creates another problem after just solving one. For instance you are already holding a position already, you borrow against it. Then BTC starts to crash. The borrow may likely ask for another additional collateral or he might force you to sell. That's the overlooked angle of another entire situation that might occur. It's worth looking into. At that point, what is the best step and solution to take to avoid selling your BTC?

[drangos]

I feel it is not just the volatility of Bitcoin that poses issues with BTC-backed lending, but the way they arrange the loan around Bitcoin's volatility. A conservative ltv can provide the borrower with a large margin of safety before he or she needs to liquidate. The other important factor is the liquidation mechanism itself. Even if the collateral is adequate, an oracle failure or a price fluctuation or low volume could cause issues. To me. Btc lending only starts to become interesting if the custody. Oracle and liquidation risks are as well thought out as the loan itself. Otherwise it may not be wise to hold the BTC considering all those extra risks.

[The Cryptovator]

But the tricky part is doing this without introducing unnecessary custodians, bridges or wrapped BTC.

If native BTC can eventually be used as collateral while staying on Bitcoin, that could open up a pretty interesting lending market.

Would you personally borrow against BTC you plan to hold long term, or would you rather just sell a small portion?

To be honest I haven’t borrowed something for Bitcoin. But yes, I have borrowed through other actions. The idea is to use Bitcoin for lending pretty interesting. For me, if I am holding Bitcoin and at the same time I need liquid cash, then I would borrow by Bitcoin collateral. I wouldn’t like to sell my Bitcoin in such a situation.

But make sure the lending platform is trusted enough. Otherwise you might lose your Bitcoin. I borrowed from the forum, and here are a couple of trusted lenders doing lending business. So make sure your Bitcoin at safe hands.

[SquirrelJulietGarden]

To be honest I haven’t borrowed something for Bitcoin. But yes, I have borrowed through other actions. The idea is to use Bitcoin for lending pretty interesting. For me, if I am holding Bitcoin and at the same time I need liquid cash, then I would borrow by Bitcoin collateral. I wouldn’t like to sell my Bitcoin in such a situation.

It's when you have bitcoins and don't want to sell your coins while you're quite sure that your finance and coming income will be good enough to take your bitcoin collateral back without risk. It's only acceptable action if you don't borrow money and use it for something risky like leverage tradings.

But make sure the lending platform is trusted enough. Otherwise you might lose your Bitcoin.

It's risky when bitcoin sent out of your wallet, you might lose it and not only with any individual lender or lending platform.

[Franklyn-wood]

One thing I’ve been wondering about lately:

If you’re holding BTC for the long term but suddenly need liquidity, selling it feels like you are about to lose your position and might never get it back at that price before you buy back in.

Borrowing against it makes more sense in theory, you get to keep the BTC, access liquidity, repay the loan, get your BTC back.

But the tricky part is doing this without introducing unnecessary custodians, bridges or wrapped BTC.

If native BTC can eventually be used as collateral while staying on Bitcoin, that could open up a pretty interesting lending market.

Would you personally borrow against BTC you plan to hold long term, or would you rather just sell a small portion?

Borrowing against BTC you plan to hold for longterm is a very risky something to do and I believe BTC investment is not meant to be used as collateral because on a second thought, what if things doesn’t go as planned and you didn’t get the money to pay back your loan, does that mean your BTC is gone? Yes I believe it will be gone.
Holding for long term, then protecting our BTC should be our major priority, if I’m in a very tight corner, no money and the only alternative is my BTC investment, I’ll rather sell a small portion and sort it out than borrowing against my BTC.

The idea of borrow against BTC is a very high risk if I ma say, no body can tell what can happen within the period of the loan. Even If there is a running business or income to pay to payback the loan one need to have it in mind that there could be uncertaintues that could interfare during the period of the loan which can make one bridge the agreement.
It's best to use any other forms of collateral instead of BTC investment, as this can expose one to a bigger risk even after a successful transaction between the lender and the lendee.

[Localhostspeed]

One thing I’ve been wondering about lately:

If you’re holding BTC for the long term but suddenly need liquidity, selling it feels like you are about to lose your position and might never get it back at that price before you buy back in.

Borrowing against it makes more sense in theory, you get to keep the BTC, access liquidity, repay the loan, get your BTC back.

But the tricky part is doing this without introducing unnecessary custodians, bridges or wrapped BTC.

If native BTC can eventually be used as collateral while staying on Bitcoin, that could open up a pretty interesting lending market.

Would you personally borrow against BTC you plan to hold long term, or would you rather just sell a small portion?

Bitcoin doesn't have smart contract, you can't lend Bitcoin with another coin on it native network, you have to bridge to another network and this alone expose you to a lot of risk. Bridges are getting hacked all the time, you may lend some small money to keep your Bitcoin with a protocol but when the network is exposed and hack, you may never get your collateral again because there was no insurance that cover your collateral, no paper work.

The interesting part people don't talk about lending is that you can get liquidated. Bitcoin isn't too volatile like altcoins that you may lose all your money to volatility if Bitcoin price fall but the you may lose it to price fluctuation if you borrowed almost what you use as collateral. If you are going to lend, take small portions, shouldn't be 30% of what you used as collateral.

[d5000]

DLCs (Discreet Log Contracts) — works with opcodes that already exist on mainnet, no OP_CAT needed:

A DLC would perhaps work if the loan is done in a stablecoin. Say, you request an USDT loan on another blockchain. Then you could contract an oracle, you agree on an address where the USDT loan has to be paid back, and (perhaps) the address where the payment would come from. The oracle would have to be trusted by both you and the lender, both you and the lender could always prove (e.g. if there is a legal dispute) that the money has been sent or not.

Probably that would not be possible to be done anonymous, just because in theory the oracle could cooperate with someone. But it would not be really custodian either.

The easiest way actually would be a contract which could react to a Bitcoin stablecoin transaction (e.g. old-style Tether with OMNI protocol) but this is currently not possible without an enhancement of Bitcoin Script. I don't discard this can be done with BitVM though ... And a DLC would also be possible based on this model.

PS: Just to be clear: the DLC itself lives on the Bitcoin blockchain and is bitcoin-native (no bridge needed). The other blokchain only comes into play because for some time there was no traditional native major Bitcoin stablecoin. Tether is however rolling out USDT based on RGB. I think this would be interesting for this purpose.