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238 sats \ 6 replies \ @justin_shocknet 16 Jan \ on: The Future Of Bitcoin Lending? bitcoin
It's the new fintech-dujour because it's an arbitrage on major financial companies not having done it yet, but they will soon, and all these startups will be dead... a lucky few might get aqui-hired.
There's also some techno-babble mixed in, some claiming you don't give up custody, but this is bullshit because coin cannot simultaneously be collaterized and unilaterally self-custodied... at best it's 3rd party escrowed in a multisig for proof it hasn't moved.
To understand where its going one must understand it's not new, if you have a brokerage account for stocks you already have (or with a few clicks can have) margin access.
Margin is where you borrow against your equities, some use this for leverage but rich people use it to avoid taxes and never sell their assets. You can do this today with ETF's... have a million dollars in Bitcoin ETF's, borrow your living expenses against it month by month... you can effectively retire on that million dollars in coin without ever having to sell or pay taxes because you're just borrowing against it. Rates on margin are pretty good because its institutionalized, under 10% with any scale.
The problem with ETF's is if you have actual coin, you can't get to ETF from coin without incurring a tax sale... this will probably change too with like-kind exchanges... but sooner than later the likes of Fidelity, Cantor Fitzgerald, NYDIG etc will allow you to skip the ETF step and just give you margin on coin they custody for you. Those 3 already announced as much, I'd expect at least one of them to make it available by year end.
Great reply. Thanks
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Let me follow up with a practical tip for anyone looking to get liquid with coin they hold...
Say for example you're married with a couple kids, you don't pay any taxes on capital gains as long as its under the 95k or so a year according to the income bracket table. Single with no kids? its a little less than half that or so.
Whatever that number is you don't pay taxes on in a given year, you can sell that amount of your physical Bitcoin and re-buy it in an ETF...
You can then borrow against that ETF on margin (most brokers should allow about 50% of previous days closing price). You can keep doing that as the value goes up. Think of this brokerage account as a credit card you never have to pay assuming Bitcoin goes up faster than you draw against it...
You just need to not be retarded and max it out at ATH's, if you do a margin call will forcibly sell some (incurring potential tax liability) to bring you back under that 50% threshold.
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this statement sounds crazy scary reckless to me
I don't know anything about this kind of stuff
That's why rich people use margin and not joe average, requires some knowledge of financial engineering
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So, if you've knowledge of financial engineering, then using margin is not reckless? And you therefore become rich? Hmm. That sounds like, if you have NASCAR knowledge/skill, then driving really fast is not dangerous. No doubt it's less dangerous than Joe Average driving fast, but 200 mph is still 200 mph.
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Rich people hire financial engineers, joe average at best only has access to schmucks that rich people haven't occupied already
Margin is more a tool of managing to stay rich, not get rich
In Bitcoiners case, it's a less risky and less expensive way to borrow against Bitcoin and stay Bitcoin rich instead of selling and paying taxes like a poor would
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