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Posted February 5, 2020
Bitcoin is quickly evolving into an asset that will become the ultimate form of collateral. Have been hearing more trad funds/groups willing to accept BTC as collateral in return for fiat loans at ~6-12% per annum
The latest I know of is a traditional global multi-family office that specializes in share-backed loans, and now have just branched out to BTC-backed loans.
Typical collateralized assets in today’s markets are (1) real estate, (2) shares, (3) bonds
As bitcoin continues to capitalize, its vol will approach & fall in-line with these categories of assets + liquidity will exceed even the most liquid shares (and BTC loans will become the cheapest, fueling more demand for BTC as the highest quality collateral) -> reflexivity
With the exception of volatility, Bitcoin scores (or will soon score) better than all other assets in all “what makes a good collateral” dimensions such as liquidity/marketability, 24/7 availability, speed and ease of settlement, global acceptance, fungibility etc.
Unlike most assets, Bitcoin is a bearer asset so its clearly unencumbered. Once lender is holding on to the actual BTC they can be sure it hasn’t been pledged to 10 other parties simultaneously
Also cheaper & more efficient than paying for title deed searches, lien enforcement
BTC can be liquidated 24/7 and almost immediately - unlike real estate which can sometimes take >1 year for resolution, or shares/bonds which only trades certain times during the day for which liquidity tends to dry up during periods of stress
Matter of time banks begin accepting Bitcoin as collateral, and they’ll have to build out infrastructure to manage Bitcoin borrowing/lending