BTC Backe Loans? - Crypto Future
In today’s article I want to talk about the further adoption of BTC and the recent news that banks might soon allow Bitcoin backed loans. I want to discuss what this means for the future development and how this could affect the crypto market. Furthermore, I want to talk about some potential concerns that should not be forgotten.
BTC Backed Loans
With some of the big banks and institutional players of the world, like Goldman Sachs, considering a Bitcoin backed loan, the future of crypto might be very bright. With the recent adoption, this news is just the next step towards the arrival of crypto in the main stream. At the moment there are a lot of pro arguments towards these Bitcoin-Backed Loans. Firstly, BTC is currently seen as a very strong inflation hedge. This means that the big banks are only waiting to offer these kind of assets for their richest of rich clients. Furthermore, it looks like Bitcoin is proving itself to be a very good alternative to the fiat currencies around the world as seen in El Savador. Bitcoin is able to be used as digital cash, especially with the help of the Lightning network. Other people, like Michael Saylor, CEO of Micro-Strategies, are seeing Bitcoin as digital property or digital energy. I will make a separate article about that in the near future, so stay tuned for that. All of these points are major pro arguments towards such an idea. Especially if the bank will be able to trade fiat money versus BTC.
But with all of the great news, there might be also some concerns. The first one being, the most obvious one. Bitcoin is still in a phase where its price is very volatile. As seen by the recent “flash crash” the price of BTC can fall over 10% in just a few hours. This is caused by the second concern, the major over leverage that is happening in the whole crypto market. With drops like the recent one, it causes mass liquidation which causes the price to even fall further. This means that people might default on their loan very quickly and left with a lot of problems. This is why in my opinion this method has its pros and cons.
Conclusion & Current Situation
To pick a side, I would still think that the idea is a very good one. I would rather take a loan against BTC and pay less interest rate while BTC grows in value rather than just take a loan with high interest rates and see all the opportunity money flow into the monthly rates rather than into BTC. On the other hand, there must be a very good risk calculation before doing that.
To summarize the article, I also wanted to take a look at the future of the crypto market. I think a lot of people panicked in the recent days because of the flash crash. To calm the people down, this might have happened for several reasons. The most obvious ones are the uncertainty about the new COVID variant and even the recent labor numbers from the FED. A lot of people might take this as bad news. Furthermore, it is end of the year and a good opportunity to offset your tax losses by realizing some BTC losses. Another possibility might be a manipulation method that is used by big whales who are holding a decent amount of BTC. By selling a big amount of BTC they can drag the price down, forcing people to sell so they can buy the asset for a better price. This means that you should hold on to your asset and if you have the chance to buy even more. In my opinion this is just a small dent before it will going up because with the news we just talked about and a potential physical backed ETF the mass adoption of BTC is really not that far away from us.
Published by ga38jem on
On 8th December 2021
Posted Using LeoFinance Beta