Bitcoin as Collateral

Bitcoin lending and using bitcoin as collateral will become a trillion-dollar industry. In the words of Michael Saylor, when you have prime Manhattan real estate, you don’t sell it, you borrow against it.

In the traditional world, holders of capital and property are able to stake their assets as collateral and pull out loans against them. This enables them to gain monetary value in the short term for expenses or desires they have while maintaining ownership of the assets they hold. This is seen as normal.
In the bitcoin world, these sorts of loans and adoption of these loans are still in their emerging phases, although rest assured, they are coming.

In the banking world, JP Morgan has announced that they will be accepting bitcoin as collateral for institutional clients. JP Morgan joins BlackRock and Fidelity, who have already begun accepting bitcoin via their ETF collateral programs.

With bitcoin-only companies, these products are also emerging. Strike, a bitcoin exchange, has bitcoin-backed loans where users can borrow against their bitcoin without selling. Their loans start at 9.5% APR and start at a minimum of $10,000. Lava, a bitcoin startup focused on the bitcoin lending space, has just released the world’s first bitcoin-backed line of credit. This unlocks a user’s bitcoin purchasing power instantly and securely.

Bitcoin being used as collateral is a reality that is here to stay.

Inherently, the “bitcoin as collateral” use case is counter to the circular economy of bitcoin because it emphasizes spending dollars that were unlocked via your bitcoin holdings and not spending your bitcoin to buy goods and services. I maintain that this is just the normal progression of the Bitcoin Thesis playing out. For as long as bitcoin remains, there will be two key characteristics defining it:

1. A store of value to protect future purchasing power against fiat debasement

2. Currency used as a medium of exchange, and ultimately, the currency of the world

In my opinion, you do not get to point number 2 without point number 1 being mainstream. People went to war for thousands of years to secure gold because it was scarce and could serve as currency. People have always sought out the scarcest asset and then used that scarce asset for currency.

Bitcoin is both.

I now resort to a saying that I will say and continue to say: In an ever increasingly digital and global world, bitcoin is better than gold in every way. In the context of bitcoin being used as a store of value and as a currency, this simply means that humanity will turn to sound money again in the future, and they will use bitcoin, not gold to back their currency.

I believe bitcoin is money, and for it to eventually be used as the currency of the world, companies and individuals need to not only build the rails enabling bitcoin payments to scale, but also need to spend and accept bitcoin for goods and services. This is a decade-long process, but as long as “Nothing stops this train” as it relates to the fiscal debt policy and the trend of fiat currency debasement, I believe this part of the equation is inevitable.

On the other side, even if bitcoin is never used as currency on a wide spectrum, again reiterating that I do not believe this to be the case for the future, bitcoin will still continue to be the best store of value the world has seen and will continue to become the best investment you can make.

Regardless, bitcoin being used and continued to be accepted as collateral is a good thing for bitcoin adoption.

People need to unlock their purchasing power via bitcoin without being required to part with their bitcoin, just like with any other traditional asset.

Bitcoin is a store of value.

Bitcoin is money.

Stack SATs.