Would you loan your bitcoin to a TradFi bank (BofA, Chase, etc.) for yield? \ stacker news ~bitcoin

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Would you loan your bitcoin to a TradFi bank (BofA, Chase, etc.) for yield?

13 sats \ 31 comments \ @bitcoin_rationalist 8 Nov 2023 bitcoin

Let's make 2 assumptions: • you get to hold your own keys • the yield is paid in $USD

145 sats \ 3 replies \ @Zepasta 8 Nov 2023

I have seen enough lending platforms going bust in 2022/2023 to know this is a terrible idea

6 sats \ 2 replies \ @bitcoin_rationalist OP 8 Nov 2023

totally, the stipulation for this thought experiment is that you would hold your keys so if the lending institution went bust, your bitcoin would stay with you.

10 sats \ 1 reply \ @Zepasta 8 Nov 2023

Hmm. I can't trust a third-party with my bitcoins. I would've to do my own research on how exactly they can lend bitcoin without actually giving up the keys.

0 sats \ 0 replies \ @bitcoin_rationalist OP 8 Nov 2023

it might not even be a thing...at this moment. maybe this is a thing in the future!

31 sats \ 1 reply \ @anon 8 Nov 2023

Hodl mentality is followed up by the idea of loaning your Bitcoin in the future. If people that hodl are not thinking about that, I guess they will take their Bitcoin to the grave or spend it. Neither are optimal conditions.

Bitcoiners who can afford to will loan Bitcoin because it will be one of the only way banks and exchanges will be able to get enough liquidity to do anything with. I am very happy to help provide a little bit of liquidity to keep things running, but my Bitcoin is not for sale.

Think about all the issues every exchange has during extremely volatile days. All those issues are caused because liquidity dries up. You will see it manifest in posts on the internet all the sudden with "Coinbase wont let me Withdrawl" or "Strike purchase went through but where is the Bitcoin?"

Already we experience liquidity crunches. These ETF's get approved and we're going to experience a liquidity crisis and price will adjust. What a wonderful reason to hodl.

You can have your cake and ice cream and everything. Not only can you become a liquidity provider, you can also dictate the terms of the loan to whoever needs the liquidity.

With all of this said, Bitcoin backed collateralize loans SHOULD BE AVOIDED FOR NOW. The LTV ratios are not favorable for plebs and you will get completely smoked in a 50-60% draw-down in price. Saylor talks about loans but he is wealthy and can do some of the things we cant (IE dictate loan terms to get favorable LTV).

0 sats \ 0 replies \ @bitcoin_rationalist OP 8 Nov 2023

nice write up- i'm not sure if it would ever be possible to loan your bitcoin WHILE ALSO holding your own keys, that's why I made the assumption in the post.

I can see banks wanting to use bitcoin as collateral in the future, and paying a nice yield to do so, that's why I was curious to see what SN plebs would do.

21 sats \ 5 replies \ @notgeld 8 Nov 2023

Do they run LN node?

0 sats \ 4 replies \ @bitcoin_rationalist OP 8 Nov 2023

curious why you would ask this- i'm not a technical person so i'm not sure why it would matter if they did/didn't

10 sats \ 3 replies \ @notgeld 8 Nov 2023

Mostly to make fun.

But actually there are anticipations that LN will set Bitcoin's "key rate". Not risk-free rate but some sort of yield that could be generated from liquitidy used in channels.

0 sats \ 2 replies \ @bitcoin_rationalist OP 8 Nov 2023

👀

10 sats \ 1 reply \ @notgeld 8 Nov 2023

But looking further into the thread I also started thinking that banks might be paying premium to have better collateral available for their business in the times of instability. But this is deeply confusing and seems that LN key rate idea is pretty self sufficient and adequate.

0 sats \ 0 replies \ @bitcoin_rationalist OP 8 Nov 2023

bitcoin is/will be the best collateral - i'm guessing that in the future they will pay a very nice premium to use it as collateral. The trick would be lending to the bank while also holding your keys so that you couldn't get rug-pulled.

reply on another page

21 sats \ 2 replies \ @0xbitcoiner 8 Nov 2023

Profit comes from the price increase, it cannot come from lending, even if you keep the private key. You don't know what your satoshis will be used for. As far as I know, this is not possible in Bitcoin, but it is in Cardano.

0 sats \ 1 reply \ @bitcoin_rationalist OP 8 Nov 2023

What i'm asking is this- let's say Chase says "Hey @0xbitcoiner, tie up some of your bitcoin with us (you hold your own keys) so we can make loans using your BTC as collateral. We'll pay you 10% APR in $USD which would be deposited into your checking account, or savings or whatever. You can use the yield to do whatever you want... even if that's buy more BTC."

Does that make sense? Your bitcoin would still be appreciating in price because it's bitcoin, but you would be making it work for you by collecting the interest from Chase.

21 sats \ 0 replies \ @0xbitcoiner 8 Nov 2023

I get the economics of lending money, but I'm not lending my satoshis to anyone. Haahaha! :)

10 sats \ 0 replies \ @fm 9 Nov 2023

If you have fuck you money.. why not.. but guess you woulnd even think about that if that was the case.. if you cant afford to lose that... Never.. Whats the pay in sats anyway?

1 sat \ 1 reply \ @DarthCoin 8 Nov 2023

the yield is paid in $USD

again... fiat maxi lunatics... I will never lend my BTC, I will never get any loan with my BTC as collateral. This question is such a stupid question, that only in a fiat world will exist.