RE: LeoThread 2025-08-12 21:28
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Initially, the idea of borrowing against Bitcoin seemed unappealing. However, after learning more, the perspective shifted completely. Selling Bitcoin was once seen as the way to buy essentials if income was insufficient.
Now, it’s clear that Bitcoin's real significance won't be appreciated by many until its value hits over $1M.
Until then, institutions are likely to be the primary buyers, and those who understand it, like institutional investors, aren't likely to sell.
Take Strategy, for example. It's developing products that essentially allow it to generate fiat and accumulate more Bitcoin.
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Rather than selling Bitcoin to Strategy, paying taxes, and incurring exchange fees, there's now openness to paying others in Bitcoin instead of fiat.
If cash is needed to purchase necessities, it's preferable to borrow fiat against a small portion of the Bitcoin stash and repay with devalued currency.
Though borrowing against Bitcoin carries risks, being a relatively new and volatile asset class, strategies can mitigate those risks. It’s wise to limit the borrowing percentage based on how much Bitcoin’s price could drop.
For example, borrowing against 5% of Bitcoin with a loan-to-value (LTV) of 50% means liquidation only occurs if Bitcoin's price plunges by around 96.875%.
In contrast, borrowing against 50% of Bitcoin with an LTV of 50% results in liquidation with a 68.75% drop. Staying safe involves keeping the LTV low.
Eventually, as fiat currency loses dominance, most people might not purchase Bitcoin. Instead, they’ll find themselves working to earn it.