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Say I own 1 bitcoin at $10k/BTC. I want to go buy a mining rig for $5k. I could sell 0.5BTC and buy the rig. BUT, I believe that BTC is going to $20k, and I don
by songeater 8y ago
Say I own 1 bitcoin at $10k/BTC.
I want to go buy a mining rig for $5k.
I could sell 0.5BTC and buy the rig.
BUT, I believe that BTC is going to $20k, and I don't want to sell.
So I go to person X and say lend me $5k against what is currently $10k of BTC.
He has 2x collateral coverage... so he makes the loan. if BTC falls to $7500, he may have the option to sell and recover his loan.
I get my money so I can create more "money" out of thin air (or rather electricity and metal). When BTC goes to $20k I am rich. RICH.
- matte_black 8y agoWhat happens if after immediately getting his $5k BTC I buy a sweet rig for $15K BTC and the price of bitcoin drops to $4k? I guess I can’t spend the collateral in the first place?
- anilshanbhag 8y agoThis can happen on the stock market too. When bitcoin drops to around $5k, you get margin called and bitcoin will get sold on the open market.
- onecooldev24 8y agoThis can easily be done on CME futures market, we don't need dharma for this. Futures can be used in multiple ways to swap inherent volatility with a fixed stream of return.
- deleted 8y ago[deleted]