BTC lending is getting interesting

[hedgeh0g]

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?

If I understand you correctly, it would be better for me to simply sell a small portion, because taking out money against collateral means you’ll no longer have a free position and will become a debtor. And that’s a slippery slope that could lead to a situation where, if the price falls even further and you need to maintain your position, you’ll have to put in even more, and eventually a vicious circle will emerge.
Therefore, it’s better to simply tell yourself that your initial trading position was chosen incorrectly and say goodbye to a small part of the deposit.

[IceLincoln]

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.

That's very possible. Usually, Bitcoin loan schemes use LTV (loan-to-value), which determines how much you can borrow from the lender. LTV on each platform varies, for example on Binance, the LTV they offer is 65%, so at most, you would only be able to borrow 65% of the value of your Bitcoin collateral. Later, Binance will adjust the collateral and trigger a liquidation if needed, if the value of your Bitcoin drops too much. With this scheme, borrowers can avoid risk.

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.

Sometimes there are things that are so urgent that a person needs money quickly, or they are just too lazy to apply for a loan which usually takes time to process. By collateralizing their Bitcoin, they can get money fast and they can choose the duration for that loan.

Bitcoin lending is a thing and that’s why OP brought it up, it’s happening but I don’t see it as a very good choice, though different individuals situations may cause them to make certain choices.
I think instead of making your bitcoin holding a collateral on a loan you’ll most definitely pay back with interest it’s better to sell part of the bitcoin to cover for whatever problems one might have.
But a better solution is building/owning backup funds because for an investor it is very important to save you from such situations where you have to take loans. Even if what you have as backup funds isn’t enough to cover your problems, now you wouldn’t be selling much of your bitcoin cause your backup have solved part.

[Don Pedro Dinero]

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

I prefer to sell. This applies not only to Bitcoin, but also to other financial assets such as real estate and the stock market. In recent years, the idea that many wealthy people don’t sell their assets but instead take out loans using them as collateral has become popular. It’s all over social media and has been promoted among ordinary people. But to get involved in that kind of mess, it’s best to have a lot of capital and know exactly what you’re doing.

If you have less than 10 bitcoins, less than $1 million in stock market assets, or several million in real estate, I think it's better to sell and not complicate your life.

[Catenaccio]

I prefer to sell. This applies not only to Bitcoin, but also to other financial assets such as real estate and the stock market. In recent years, the idea that many wealthy people don’t sell their assets but instead take out loans using them as collateral has become popular. It’s all over social media and has been promoted among ordinary people. But to get involved in that kind of mess, it’s best to have a lot of capital and know exactly what you’re doing.

If you have less than 10 bitcoins, less than $1 million in stock market assets, or several million in real estate, I think it's better to sell and not complicate your life.

This is a safe approach and experienced people will possibly prefer to do this. People who are careful would prefer to do this too but if they are actually careful, chance of falling into such financial troubling situation is small enough. If they unfortunately fall to this, with their careful instinct, they will sell their bitcoins to have money to use, to resolve their financial needs or troubles because it's the safest way.

No unnecessary loan interest, no extra pressure, and after they successfully pass through such financial troubles, they can come back to the market as Bitcoin investors.

Being in a financial trouble, being at risk is already bad, but if they take loans, they take more risk, escalate risk, that's worse.

[BitBakerr1]

It's better to take a loan with Fiat in a worst-case scenario than putting my bitcoin at risk. At least, I can use the profits from my bitcoin to pay back the loan or pay it back installmentally.

I agree with you that it is better to take loan with Fiat in a worst-case scenario than putting your bitcoin at risk.
One thing that I always fear is to lose my bitcoin in a way that I will regret in the future, some people have already lost their bitcoin in a way that they are regretting now, bitcoin is for long-term investment and when you accumulate bitcoin make sure you keep it for a very long time because that is the only way you can really make very good profit from it.

If you are expecting to pay any loan you took with the interest you will get from bitcoin, then you are actually making a mistake because you really don’t know how long it will last for you to get profit from bitcoin, the best option is to look for another way to pay back the money even if it’s by installment as you have suggested.

[yudi09]

If someone is willing, why not! There are many factors to consider when using Bitcoin as collateral to get money, because there may come a time when we suddenly need cash to pay for something, especially if we don’t have an emergency fund. One consideration, in my opinion, is the trustworthiness of the party accepting our Bitcoin as collateral—whether we can trust them to honor the agreement even though Bitcoin’s price is highly volatile.

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

In this regard, I think it depends on the level of liquidity. If it’s possible to sell a small portion to cover the cost, I would certainly do so. If the amount is large, I’d be better off going to a bank and using my securities as collateral to secure a loan.

[Jegileman]

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

It will depend on the situation I find myself in. The whole point of investing is to make profit and when we make those profits, we spend them for our own use. Isn’t that the main point of investing in bitcoin? Some may feel they’ve lost their position by taking from their investment instead of going to borrow money to solve the problem they needed the money for.

Bitcoin as a volatile asset still gives you the chance and opportunity to invest back at a lower price, that’s where the DCA comes in effect. If borrowing the money won’t put me in a rather tight situation, I will borrow the money and solve the problem but if it will that may even cause me to lose my position in Bitcoin holding later, I will take a little portion from the investment and settle the problem. I believe that I will still get the chance to invest later, probably as a lower price I initially invested with.

[Faisal2202]

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.

I am sure you have not heard about it before because if you had then your opinion would be different. Allow me to tell you that, when lenders gives loan they don't give 100% loan of your collateral they can have different Loan to value ratio (LTV).

Means, they never gives 100% loan, they can give 50% or 70%, depends on their offers. Same deals are given when you are using BTC mortgage. So they already keeps the volatility in mind. So you can use BTC to take loan.

Imagine you can save yourself from taxation if you just can take loan on your BTC. You don't get to sell your position, you can get cash, spend as you want and you don't even get to pay tax for it.
Read this and search about it.
https://bitcointalk.org/index.php?topic=5593104.msg67112252#msg67112252

[Oshio-man]

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.

That is when you have enough funds that will make you not to sell your bitcoin on time because it will lead you to earn income that will make you look professional in bitcoin holding, there is nothing that will make you be in a hurry to release bitcoin when you know that the price will still increase higher because when you sell your bitcoin when the price is high, it will make you earn income that will make you to be confident in holding bitcoin in the long term or short term.

[Merit.s]

It's better to take a loan with Fiat in a worst-case scenario than putting my bitcoin at risk. At least, I can use the profits from my bitcoin to pay back the loan or pay it back installmentally.

I agree with you that it is better to take loan with Fiat in a worst-case scenario than putting your bitcoin at risk.
One thing that I always fear is to lose my bitcoin in a way that I will regret in the future, some people have already lost their bitcoin in a way that they are regretting now, bitcoin is for long-term investment and when you accumulate bitcoin make sure you keep it for a very long time because that is the only way you can really make very good profit from it.

If you are expecting to pay any loan you took with the interest you will get from bitcoin, then you are actually making a mistakbecause you really don’t know how long it will last for you to get profit from bitcoin, the best option is to look for another way to pay back the money even if it’s by installment as you have suggested.

This is the reason why if you're investing in bitcoin for long term, you need to prepare for the worst case scenario by setting up an emergency funds to tackle any unforeseen circumstances that pops up to make you sell your bitcoin when it's not of your will or in a situation like this.

Your emergency funds will prevent you from using your bitcoin to take loan and put it at risk. I don't like taking loan because it is like a set back if the money isn't used to make more money.

[Hazink]

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

I can't trust any service because of that, I will possibly go with the idea of selling some portion of my bitcoin and covering that expenses than ever, making use of any service where the interest could be greater than the possible profit I can make from bitcoin during the time of repayment. But if I can get the money from a friend which I don't need to pay back with interest, and I'm also expecting money from other sources, I can easily take it and leave to sell the bitcoin.

[Jasmyne]

If someone is willing, why not! There are many factors to consider when using Bitcoin as collateral to get money, because there may come a time when we suddenly need cash to pay for something, especially if we don’t have an emergency fund. One consideration, in my opinion, is the trustworthiness of the party accepting our Bitcoin as collateral—whether we can trust them to honor the agreement even though Bitcoin’s price is highly volatile.

Even if the person giving the loan keeps to the agreement, what if things doesn’t go well for the person borrowing as planned. The person borrowing might end up with issue of having difficulty in repaying his loan and he might end up loosing his bitcoin, so it better he just sells little portion from there and use.

[Fiatless]

If someone is willing, why not! There are many factors to consider when using Bitcoin as collateral to get money, because there may come a time when we suddenly need cash to pay for something, especially if we don’t have an emergency fund. One consideration, in my opinion, is the trustworthiness of the party accepting our Bitcoin as collateral—whether we can trust them to honor the agreement even though Bitcoin’s price is highly volatile.

Even when one have enough backup funds, some emergencies such as lose of jobs or health issues couid put someone into financial stress. Having a trustworthy platform that accepts Bitcoin as collateral would be a good option. Selling Bitcoin at a loss because of these issues would be painful.

My problem now is how to identify a trustworthy service providers. I will prefer to use a locally registered financial institution that is backed by a deposit insurance company. Most of the platform that offers these Bitcoin loans services don't have physical presence in my location. I wouldn't want to risk a foreign company because of unforseen circumstances.

[Compromise me]

No, I wouldn't do that, because with all the preparations I've made so far, I already have sufficient emergency funds for when the unexpected happens. So, I'm unlikely to take out a loan or sell my Bitcoin. Speaking of using Bitcoin as collateral for a loan, I think that sounds a bit off at the moment. But I don't know for sure, but it seems unlikely that many would agree to it at this point.

Bitcoin is an asset that fluctuates quite rapidly, so banks certainly won't accept Bitcoin as collateral. Even if Bitcoin could be used as collateral for a loan, I personally am very reluctant to borrow money. I'd rather sell some of my Bitcoin, as it's more mentally calming than having to borrow money. It's mentally damaging, in my opinion, because the stress of having debt is incredibly stressful.

People who are  wellprepared for holding bitcoin always need to have done their homework because it's also important, and without having a good amount of emergency funds, never stand for any strategy; this will hit you hard, and things are surely going to never be in your favor. Having a loan for your bitcoin is also not a good idea because paying interest and then transaction fees is also not a good deal. Bitcoin volatility is one of the biggest threats for anyone because people always feel panic and make wrong decisions just because of a few things that are always natural or part of Bitcoin. It's never been recommended to just focus on accumulation; it's also important to have some good strategy, and emergency funds are also best. Without these, never try to start this.

[yudi09]

If someone is willing, why not! There are many factors to consider when using Bitcoin as collateral to get money, because there may come a time when we suddenly need cash to pay for something, especially if we don’t have an emergency fund. One consideration, in my opinion, is the trustworthiness of the party accepting our Bitcoin as collateral—whether we can trust them to honor the agreement even though Bitcoin’s price is highly volatile.

My problem now is how to identify a trustworthy service providers. I will prefer to use a locally registered financial institution that is backed by a deposit insurance company. Most of the platform that offers these Bitcoin loans services don't have physical presence in my location. I wouldn't want to risk a foreign company because of unforseen circumstances.

When it comes to service provider platforms, the issue of trust raises questions: whether they can be trusted or if they’ll end up being a scam.
In my country, the only service provider I can trust is a bank. Since Bitcoin is used solely as a commodity asset, none of the banks I’m aware of currently accept Bitcoin as collateral; consequently, I can only use securities as collateral to secure a loan in fiat currency. If I have to do this, I can protect the Bitcoin I’ve been holding as an investment asset without having to touch it.

[HajiBagi]

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.

Borrowing against your Btc is very dangerous, anyone who understands bitcoin will never try that because the person will know that he did not know what will happen to the bitcoin in some days or at any time, the best thing for anyone in a tight corner or any bad situation is to sell some part of his bitcoin and solve the problem, and when he has the opportunity to buy it back, he can buy it back. What every investor should know is that they should never use their bitcoin to take out a loan or borrowed from anyone, bitcoin cannot be predict and will never be predicted, instead, sell some part of your bitcoin and do anything you want with the money and have peace of mind.

[Maslate]

I think the bottom line here, if you value your bitcoin, why go for btc lending? You know that's very dangerous because anytime you will lost your bitcoin because you are no longer in full control of it. And the essence of accumulating and sustaining your bitcoin all throughout your life instantly lost once you decide to go for btc lending where the future of your coins are no longer secured.

You can have fiat loan and pay it with your regular salary, but never anticipate future profits of bitcoin to be used as a payment because in reality, none of us knows when will bitcoin hit its bullish price and make all of us highly profitable.

[Rengga Jati]

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

Some people may be interested with the idea, but others may keep using a safer way. Making Bitcoin as a collateral isn't really safe because it fluctuates. I'm not really sure how to measure the value of Bitcoin if someone wants to take a loan for years.

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

I prefer to sell a small number of Bitcoin. However, I will wait for the Bitcoin price at the green market first. Or I will consider to use my saving if it is for urgent matters. TBH, I avoid borrowing money because I think it isn't the best way. It even rises possible problem if we have no clear plan for the repayment.

You can have fiat loan and pay it with your regular salary, but never anticipate future profits of bitcoin to be used as a payment because in reality, none of us knows when will bitcoin hit its bullish price and make all of us highly profitable.

If we have monthly income, it is no problem to take a loan with the amount of money that we easily to repay the loan.
No problem to repay with the possible profits in Bitcoin. But we must ensure that the people who give us the loan money, they don't mind to wait for a quit long time. We actually know the common pattern of the cycle, including the time for bullish and bearish.

[shinratensei_]

I actually don't mind my bitcoin in custodial's hand when borrowing money, I think i prefered something like Aave V4 proposal where instead of keeping the BTC in smart contract, they used regulated custodian. If the custodian hand is competent, my collateral being in their hands is fine and if they could accept bitcoin natively without wrapping or bridging, the better. There is actually something similar to what you just explained called Trustless Bitcoin Vault but contract exploit risk possibility still exist with that approach. Unless TBV is truly tested, I'd prefer regulated custodian over it. TBV is targeted to launch on mainnet October 2026 so we'll see.

[Tiaramane]

I actually don't mind my bitcoin in custodial's hand when borrowing money, I think i prefered something like Aave V4 proposal where instead of keeping the BTC in smart contract, they used regulated custodian. If the custodian hand is competent, my collateral being in their hands is fine and if they could accept bitcoin natively without wrapping or bridging, the better. There is actually something similar to what you just explained called Trustless Bitcoin Vault but contract exploit risk possibility still exist with that approach. Unless TBV is truly tested, I'd prefer regulated custodian over it. TBV is targeted to launch on mainnet October 2026 so we'll see.

The tradeoff really comes down to where you’re more comfortable placing the risk, trusted third-party custody or smart-contract risk. What I find interesting about TBV is that it’s trying to keep the Bitcoin native while removing the need for a custodian. But like you said, the real test is what happens after mainnet launch and real users start putting meaningful BTC through it. October should be an interesting one for sure.