10 ms·

Bitcoin-collateralized loans coming to Coinbase

58 points by abi 6y ago

marcell 6y ago
Aside from the brand name of Coinbase, this seems worse than similar offering from Nexo (nexo.io): - Coinbase APR is 8%, Nexo is 5.9% - Coinbase max loan is $20k, Nexo is $2 million I can see the appeal of borrowing against your bitcoin or other cryptocurrency, but I'm not sure if there's much value in borrowing $20k. If you're in a position to hold $60k bitcoin on Coinbase, do you really have a need for a 1 year bridge loan of $20k? At a rate only slightly better than a credit card?
- vmception 6y ago
  > If you're in a position to hold $60k bitcoin on Coinbase, do you really have a need for a 1 year bridge loan of $20k? At a rate only slightly better than a credit card? If the $60k of bitcoin on Coinbase was bought with a loan from Nexo because you have $100k of bitcoin on Nexo, then yes lol. Wrap that bitcoin in RenVM to use it on the Ethereum blockchain, maybe some renBTC liquidity pool is earning you more, or sell it on Mooniswap for something else that is earning more. YAM/yCRV staking anyone?
  - ejanus 6y ago
    I need to tap your brain. I am trying to do something in this area. Can we chat privately?
    - vmception 6y ago
      put your email up in your profile for a few days
      - ejanus 6y ago
        Done
        vmception 6y ago
        in your about section, I should say.
        ejanus 6y ago
        Yes
  - swader999 6y ago
    Poor YAM
    - deleted 6y ago
      [deleted]
  - rayuela 6y ago
    Your suggestion is to take this high interest loan to take a long position in a high risk high yield speculative investment in other cryto... wut? This is like telling people to buy cryto with their credit card....
    - vmception 6y ago
      it wasn't a suggestion or telling anyone to do anything, were you making a point? would you prefer a little disclaimer at the bottom to feel more comfortable? not all of us need that. make your own decisions. others want to know whats possible.
      - rayuela 6y ago
        Yeah my point was to be a disclaimer on your comment for what a stupid idea it is.
        vmception 6y ago
        A lot of people know how to manage their risk on leveraged products, and bitcoin this decade has regulated financial products to make that practical Interest payments are deductible in many circumstances, borrowing against holdings do not cause taxes from selling the holdings, and in some circumstances capital losses can be converted to net operating losses deductible against income paid in both prior and future years, practically ensuring you get your money back if properly planned. (Carrybacks were removed in the 2017 tax reform law but restored in the CARES Act.) But I understand, calculated risks are only for people good at math.
        rayuela 6y ago
        Wow can't believe no one's thought of that before. How can you lose?!?!?! You do you Mr. 200IQ
        vmception 6y ago
        You can lose thats the point of socializing the losses and privatizing the gains Make your own choices
  - grenoire 6y ago
    Daily reminder that leveraged investment strategies can and will blow up in your face...
    - vmception 6y ago
      daily reminder that non-accredited investors should be able to blow up in private equity too, because they can already blow up in worse ways so it doesn't make sense to shut them out of everything that has a chance of being professionally run
- deleted 6y ago
  [deleted]
jtchang 6y ago
Sounds like a terrible idea given how much bitcoin's value can fluctuate. And they may call the loan. This is if you are really bullish on bitcoin.
- oleganza 6y ago
  They loan up to 30% of the BTC value. So as long as it does not crash more than 70%, everything's fine [1]. [1] Which happened every time after the peak of a big bitcoin run-up ;-)
  - hydraxis 6y ago
    And then there will be margin calls and forced sales, which in case of a crash will accentuate the drop considerably...
    - rkagerer 6y ago
      In the scenario where the market is crashing faster than they can keep up with, do you think they'll put their own sell orders ahead of those of other customers? Could they get in trouble for that?
- ur-whale 6y ago
  I suspect they've done the math of how much collateral is needed to absorb the assumed future volatility
spir 6y ago
ETH-collateralized loans are permissionlessly accessible on the Ethereum blockchain. Right now it's a 0% APR. https://oasis.app/borrow https://oasis.app/borrow You can also get a Bitcoin-collateralized loan using the same service. A Bitcoin loan on the Ethereum blockchain. But, it's less secure because the WBTC "Wrapped Bitcoin" token on Ethereum relies on a network of custodians who redeem these tokens for actual BTC.
- imtringued 6y ago
  Why would anyone loan out money at 0% APR? That only makes sense if you value the ETH far more than the money. There is no way to profit from borrowers who pay the loan back. The only way you could possibly turn a profit is by speculating that ETH is rising in price and getting ETH as collateral when a borrower defaults but if that's your strategy why not buy ETH directly?
  - xur17 6y ago
    DAI, the stablecoin produced when you loan out money is in very high demand, so Makerdao is trying to encourage more people to create it. There's a lot of demand for DAI because several protocols that use it are giving away tokens for using their platforms (governance tokens that have a tradable value).
raesene9 6y ago
I wonder how they're hedging the risk of Tether/Bitfinex losing their case(s) against the NYAG and others and the likely resultant drop in value of BTC.
- martinko 6y ago
  Even if they do lose, it will not have a material effect on the price of btc (apart from a potential short-term wick)
  - raesene9 6y ago
    That's an interesting view, what makes you say that? Tether's market cap is about $10b now and it's daily transaction volume regularly exceeds that of BTC. It would seem likely that if that volume left the market it would have a significant impact on the cost of other coins, especially if they are not 1:1 backed.
    - martinko 6y ago
      Tether is just a vehicle for transferring offshore USD between third parties. It does not underpin the value of bitcoin, it is more of a parallel system to bitcoin for transferring USD.
      - raesene9 6y ago
        you're assuming that Tether is not just printing Tether's out of nothing of course :) As they have never had an audit and have already admitted to not being 1:1 backed, that's not necessarily an assumption that'll play out well.
        martinko 6y ago
        Even if they are (having spoken to the cfo and ceo personally, i dont hink they are), this affects tether holders, not btc holders.
lz400 6y ago
Seeing bitcoin reinvent the banking system they set themselves to destroy has a very Animal Farm-y feeling to it.
- reportgunner 6y ago
  Coinbase is not bitcoin.
- TazeTSchnitzel 6y ago
  The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which
- Semaphor 6y ago
  But that’s coinbase being a bank, not BTC. There are coins that have loans via smart contracts, but they aren’t BTC. What’s happening here is closer to "An exchange is offering banking services" which sounds a lot less weird.
  - notahacker 6y ago
    But the real question is why this particular banking service exists? If Bitcoin is the stable currency it was designed to be, then it would be nonsensical for a person already holding it to borrow 30% of its value in USD at 8% APR. The answer of course is that some people are so convinced that BTC will rise in value by more than 8% over the loan duration they're prepared to go into debt to keep large portions of their net worth in it, and some might even fancy buying more BTC with the cash they've borrowed, and maybe borrowing against that too. In this analogy BTC isn't the bank, it's the houses people were taking out the subprime mortgages on (minus the upside of avoiding rental payments)
    - deleted 6y ago
      [deleted]
    - Semaphor 6y ago
      > If Bitcoin is the stable currency it was designed to be, My impression is, that this is a pretty contentious statement ;)
redis_mlc 6y ago
Can somebody explain why US software engineers on HN are still enmeshed in cryptocurrency?
ur-whale 6y ago
This is a very interesting development, especially given Coinbase's reach and visibility. The unfortunate effect might be that people who have been so far stubbornly HODLing their BTC themselves (self-custody) will be tempted to surrender their coins to the exchange in exchange of immediate liquidity thereby increasing the concentration of actual custody of BTC by the exchanges ... the very thing Bitcoin was designed to avoid. The temptation here is (at least on paper): you get to "keep" your Bitcoin while enjoying the benefit of them at the same time (betting. of course, that BTC will keep going up over time). Here's to hoping hodlers will resist the temptation.
mrkramer 6y ago
Coinbase is supported by Goldman Sachs and JP Morgan[1][2] no wonder they told them to start giving loans and turned them into a bank. Satoshi wouldn't like this; you can make smart contracts directly on the blockchain and give loans if you want. [1]https://web.archive.org/web/20130109041534/https://blog.coinbase.com/post/39672092708/fred-ehrsam-joins-coinbase https://web.archive.org/web/20130109041534/https://blog.coin... [2]https://www.wsj.com/articles/jpmorgan-extends-banking-services-to-bitcoin-exchanges-11589281201?redirect=amp https://www.wsj.com/articles/jpmorgan-extends-banking-servic...
zalkota 6y ago
Ethereum decentralized finance is not “copying” the current financial institutions. If you think that, then you are misinformed.
solotronics 6y ago
A lot of people are missing the fact that loans are not taxed in the US.
deleted 6y ago
[deleted]
apta 6y ago
Lending money with interest has been a known evil for thousands of years now, Judaism, Christianity, and Islam all prohibit it. Yet, we do not learn from the past.
RichardHeart 6y ago
Cryptocurrency was invented to remove middlemen and counterparty risk. Centralized finance (lending/borrowing) is the opposite of what Bitcoin was invented for. Decentralized finance extends Bitcoins vision beyond the small subset of finance that is currency. One such open source project is uniswap. Disclaimer, I founded a cryptocurrency.

58 points by abi 6y ago

Aside from the brand name of Coinbase, this seems worse than similar offering from Nexo (nexo.io): - Coinbase APR is 8%, Nexo is 5.9% - Coinbase max loan is $20k, Nexo is $2 million I can see the appeal of borrowing against your bitcoin or other cryptocurrency, but I'm not sure if there's much value in borrowing $20k. If you're in a position to hold $60k bitcoin on Coinbase, do you really have a need for a 1 year bridge loan of $20k? At a rate only slightly better than a credit card?

vmception 6y ago
> If you're in a position to hold $60k bitcoin on Coinbase, do you really have a need for a 1 year bridge loan of $20k? At a rate only slightly better than a credit card? If the $60k of bitcoin on Coinbase was bought with a loan from Nexo because you have $100k of bitcoin on Nexo, then yes lol. Wrap that bitcoin in RenVM to use it on the Ethereum blockchain, maybe some renBTC liquidity pool is earning you more, or sell it on Mooniswap for something else that is earning more. YAM/yCRV staking anyone?
- ejanus 6y ago
  I need to tap your brain. I am trying to do something in this area. Can we chat privately?
  - vmception 6y ago
    put your email up in your profile for a few days
    - ejanus 6y ago
      Done
      - vmception 6y ago
        in your about section, I should say.
        ejanus 6y ago
        Yes
- swader999 6y ago
  Poor YAM
  - deleted 6y ago
    [deleted]
- rayuela 6y ago
  Your suggestion is to take this high interest loan to take a long position in a high risk high yield speculative investment in other cryto... wut? This is like telling people to buy cryto with their credit card....
  - vmception 6y ago
    it wasn't a suggestion or telling anyone to do anything, were you making a point? would you prefer a little disclaimer at the bottom to feel more comfortable? not all of us need that. make your own decisions. others want to know whats possible.
    - rayuela 6y ago
      Yeah my point was to be a disclaimer on your comment for what a stupid idea it is.
      - vmception 6y ago
        A lot of people know how to manage their risk on leveraged products, and bitcoin this decade has regulated financial products to make that practical Interest payments are deductible in many circumstances, borrowing against holdings do not cause taxes from selling the holdings, and in some circumstances capital losses can be converted to net operating losses deductible against income paid in both prior and future years, practically ensuring you get your money back if properly planned. (Carrybacks were removed in the 2017 tax reform law but restored in the CARES Act.) But I understand, calculated risks are only for people good at math.
        rayuela 6y ago
        Wow can't believe no one's thought of that before. How can you lose?!?!?! You do you Mr. 200IQ
        vmception 6y ago
        You can lose thats the point of socializing the losses and privatizing the gains Make your own choices
- grenoire 6y ago
  Daily reminder that leveraged investment strategies can and will blow up in your face...
  - vmception 6y ago
    daily reminder that non-accredited investors should be able to blow up in private equity too, because they can already blow up in worse ways so it doesn't make sense to shut them out of everything that has a chance of being professionally run
deleted 6y ago
[deleted]

jtchang 6y ago

Sounds like a terrible idea given how much bitcoin's value can fluctuate. And they may call the loan. This is if you are really bullish on bitcoin.

oleganza 6y ago
They loan up to 30% of the BTC value. So as long as it does not crash more than 70%, everything's fine [1]. [1] Which happened every time after the peak of a big bitcoin run-up ;-)
- hydraxis 6y ago
  And then there will be margin calls and forced sales, which in case of a crash will accentuate the drop considerably...
  - rkagerer 6y ago
    In the scenario where the market is crashing faster than they can keep up with, do you think they'll put their own sell orders ahead of those of other customers? Could they get in trouble for that?
ur-whale 6y ago
I suspect they've done the math of how much collateral is needed to absorb the assumed future volatility

spir 6y ago

ETH-collateralized loans are permissionlessly accessible on the Ethereum blockchain. Right now it's a 0% APR. https://oasis.app/borrow https://oasis.app/borrow You can also get a Bitcoin-collateralized loan using the same service. A Bitcoin loan on the Ethereum blockchain. But, it's less secure because the WBTC "Wrapped Bitcoin" token on Ethereum relies on a network of custodians who redeem these tokens for actual BTC.

imtringued 6y ago
Why would anyone loan out money at 0% APR? That only makes sense if you value the ETH far more than the money. There is no way to profit from borrowers who pay the loan back. The only way you could possibly turn a profit is by speculating that ETH is rising in price and getting ETH as collateral when a borrower defaults but if that's your strategy why not buy ETH directly?
- xur17 6y ago
  DAI, the stablecoin produced when you loan out money is in very high demand, so Makerdao is trying to encourage more people to create it. There's a lot of demand for DAI because several protocols that use it are giving away tokens for using their platforms (governance tokens that have a tradable value).

raesene9 6y ago

I wonder how they're hedging the risk of Tether/Bitfinex losing their case(s) against the NYAG and others and the likely resultant drop in value of BTC.

martinko 6y ago
Even if they do lose, it will not have a material effect on the price of btc (apart from a potential short-term wick)
- raesene9 6y ago
  That's an interesting view, what makes you say that? Tether's market cap is about $10b now and it's daily transaction volume regularly exceeds that of BTC. It would seem likely that if that volume left the market it would have a significant impact on the cost of other coins, especially if they are not 1:1 backed.
  - martinko 6y ago
    Tether is just a vehicle for transferring offshore USD between third parties. It does not underpin the value of bitcoin, it is more of a parallel system to bitcoin for transferring USD.
    - raesene9 6y ago
      you're assuming that Tether is not just printing Tether's out of nothing of course :) As they have never had an audit and have already admitted to not being 1:1 backed, that's not necessarily an assumption that'll play out well.
      - martinko 6y ago
        Even if they are (having spoken to the cfo and ceo personally, i dont hink they are), this affects tether holders, not btc holders.

lz400 6y ago

Seeing bitcoin reinvent the banking system they set themselves to destroy has a very Animal Farm-y feeling to it.

reportgunner 6y ago
Coinbase is not bitcoin.
TazeTSchnitzel 6y ago
The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which
Semaphor 6y ago
But that’s coinbase being a bank, not BTC. There are coins that have loans via smart contracts, but they aren’t BTC. What’s happening here is closer to "An exchange is offering banking services" which sounds a lot less weird.
- notahacker 6y ago
  But the real question is why this particular banking service exists? If Bitcoin is the stable currency it was designed to be, then it would be nonsensical for a person already holding it to borrow 30% of its value in USD at 8% APR. The answer of course is that some people are so convinced that BTC will rise in value by more than 8% over the loan duration they're prepared to go into debt to keep large portions of their net worth in it, and some might even fancy buying more BTC with the cash they've borrowed, and maybe borrowing against that too. In this analogy BTC isn't the bank, it's the houses people were taking out the subprime mortgages on (minus the upside of avoiding rental payments)
  - deleted 6y ago
    [deleted]
  - Semaphor 6y ago
    > If Bitcoin is the stable currency it was designed to be, My impression is, that this is a pretty contentious statement ;)

redis_mlc 6y ago

Can somebody explain why US software engineers on HN are still enmeshed in cryptocurrency?

ur-whale 6y ago

This is a very interesting development, especially given Coinbase's reach and visibility. The unfortunate effect might be that people who have been so far stubbornly HODLing their BTC themselves (self-custody) will be tempted to surrender their coins to the exchange in exchange of immediate liquidity thereby increasing the concentration of actual custody of BTC by the exchanges ... the very thing Bitcoin was designed to avoid. The temptation here is (at least on paper): you get to "keep" your Bitcoin while enjoying the benefit of them at the same time (betting. of course, that BTC will keep going up over time). Here's to hoping hodlers will resist the temptation.

mrkramer 6y ago

Coinbase is supported by Goldman Sachs and JP Morgan[1][2] no wonder they told them to start giving loans and turned them into a bank. Satoshi wouldn't like this; you can make smart contracts directly on the blockchain and give loans if you want. [1]https://web.archive.org/web/20130109041534/https://blog.coinbase.com/post/39672092708/fred-ehrsam-joins-coinbase https://web.archive.org/web/20130109041534/https://blog.coin... [2]https://www.wsj.com/articles/jpmorgan-extends-banking-services-to-bitcoin-exchanges-11589281201?redirect=amp https://www.wsj.com/articles/jpmorgan-extends-banking-servic...

zalkota 6y ago

Ethereum decentralized finance is not “copying” the current financial institutions. If you think that, then you are misinformed.

solotronics 6y ago

A lot of people are missing the fact that loans are not taxed in the US.

deleted 6y ago

[deleted]

apta 6y ago

Lending money with interest has been a known evil for thousands of years now, Judaism, Christianity, and Islam all prohibit it. Yet, we do not learn from the past.

RichardHeart 6y ago

Cryptocurrency was invented to remove middlemen and counterparty risk. Centralized finance (lending/borrowing) is the opposite of what Bitcoin was invented for. Decentralized finance extends Bitcoins vision beyond the small subset of finance that is currency. One such open source project is uniswap. Disclaimer, I founded a cryptocurrency.