5 ms·

Sure, but you can borrow 730k and still hold on to the asset, why not do it?

TuringNYC 5y ago
Because if your coins go down to $100k, you're going to get margin called on your borrow. Given the volatility of crypto, you wouldnt want to borrow more than 10% of your funds.
- rawtxapp 5y ago
  Yes, you have to be carefully not to get margin-called, from what I've seen most people that have over 10M+$, tend to borrow up to 25-30% of their collateral's value (for example[1], this person borrowed 82M$ using 228M$ worth of collateral). 1: https://defiexplore.com/cdp/9167 https://defiexplore.com/cdp/9167
  - user-the-name 5y ago
    There is no way to be "careful not to get margin-called", since crypto markets are heavily manipulated in order to force margin calls. Trading on margin on crypto markets is a fool's game.
    - rawtxapp 5y ago
      Notice that borrowing != trading on margin, you can certainly buy back into the asset, but you can also do lots of other things with the money. You can be careful with your borrowing, like the example I gave, in that case, Bitcoin would need to drop by 50% before that person get's liquidated and even if that happens, they still have the 82M$ in cash.
      - TuringNYC 5y ago
        >> You can be careful with your borrowing, like the example I gave, in that case, Bitcoin would need to drop by 50% before that person get's liquidated and even if that happens, they still have the 82M$ in cash. Not quite...now you still owe capital gains tax on the forced liquidation price (minus cost basis)! So perhaps a large part of your $82M draw goes into taxes.
    - devoutsalsa 5y ago
      You're making me think that maybe I shouldn't have sold puts on DOGE, levered myself up 20x, and wait for it to go to the moon. There's no way I can lose!
    - babyshake 5y ago
      At least in a bull market, it seems safe to assume that an asset like BTC or ETH will not suddenly decrease by over 50%.
      - user-the-name 5y ago
        It is definitely not safe to assume anything in the incredibly corrupt and manipulated cryptocurrency markets.
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ashtonkem 5y ago
Because you might lose that 730K, since you’re still exposed to a very volatile market.
- rawtxapp 5y ago
  The 730k is already in bank account, you'd only lose the collateral in case of liquidation, but that doesn't matter because your alternative was to sell it altogether.
  - zepto 5y ago
    You can’t use the 730k then but you are now accruing interest on it, so what’s the point in having it?
  - dkarras 5y ago
    So I have 730k in bank account, but instead of using it, I borrow 730k and spend that money (how do you even decide "which" money you are spending anyways, it's all money) and pay interest on the loan? Why would I do that?
    - rawtxapp 5y ago
      Not sure I understand what you mean, you only have 1 730k which you've borrowed. Interest rates are a drop in the bucket (~4%) compared to ~25-40% tax rates and that's ignoring asset appreciation (BTC averages ~300% YoY). If you use something like makerdao, you won't even have to pay a single cent of the debt back as long as you borrow conservatively and don't need your collateral back.
      - pinkfairy10 5y ago
        This assumes BTC goes up every year tho
aqme28 5y ago
If you think that asset is going to go down, you'd rather just sell it than borrow against it, no?
pinkfairy10 5y ago
Because there will be an annual interest rate to borrow and there is always margin call risk given the vol of crypto

Because if your coins go down to $100k, you're going to get margin called on your borrow. Given the volatility of crypto, you wouldnt want to borrow more than 10% of your funds.

rawtxapp 5y ago
Yes, you have to be carefully not to get margin-called, from what I've seen most people that have over 10M+$, tend to borrow up to 25-30% of their collateral's value (for example[1], this person borrowed 82M$ using 228M$ worth of collateral). 1: https://defiexplore.com/cdp/9167 https://defiexplore.com/cdp/9167
- user-the-name 5y ago
  There is no way to be "careful not to get margin-called", since crypto markets are heavily manipulated in order to force margin calls. Trading on margin on crypto markets is a fool's game.
  - rawtxapp 5y ago
    Notice that borrowing != trading on margin, you can certainly buy back into the asset, but you can also do lots of other things with the money. You can be careful with your borrowing, like the example I gave, in that case, Bitcoin would need to drop by 50% before that person get's liquidated and even if that happens, they still have the 82M$ in cash.
    - TuringNYC 5y ago
      >> You can be careful with your borrowing, like the example I gave, in that case, Bitcoin would need to drop by 50% before that person get's liquidated and even if that happens, they still have the 82M$ in cash. Not quite...now you still owe capital gains tax on the forced liquidation price (minus cost basis)! So perhaps a large part of your $82M draw goes into taxes.
  - devoutsalsa 5y ago
    You're making me think that maybe I shouldn't have sold puts on DOGE, levered myself up 20x, and wait for it to go to the moon. There's no way I can lose!
  - babyshake 5y ago
    At least in a bull market, it seems safe to assume that an asset like BTC or ETH will not suddenly decrease by over 50%.
    - user-the-name 5y ago
      It is definitely not safe to assume anything in the incredibly corrupt and manipulated cryptocurrency markets.

deleted 5y ago

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ashtonkem 5y ago

Because you might lose that 730K, since you’re still exposed to a very volatile market.

rawtxapp 5y ago
The 730k is already in bank account, you'd only lose the collateral in case of liquidation, but that doesn't matter because your alternative was to sell it altogether.
- zepto 5y ago
  You can’t use the 730k then but you are now accruing interest on it, so what’s the point in having it?
- dkarras 5y ago
  So I have 730k in bank account, but instead of using it, I borrow 730k and spend that money (how do you even decide "which" money you are spending anyways, it's all money) and pay interest on the loan? Why would I do that?
  - rawtxapp 5y ago
    Not sure I understand what you mean, you only have 1 730k which you've borrowed. Interest rates are a drop in the bucket (~4%) compared to ~25-40% tax rates and that's ignoring asset appreciation (BTC averages ~300% YoY). If you use something like makerdao, you won't even have to pay a single cent of the debt back as long as you borrow conservatively and don't need your collateral back.
    - pinkfairy10 5y ago
      This assumes BTC goes up every year tho

aqme28 5y ago

If you think that asset is going to go down, you'd rather just sell it than borrow against it, no?

pinkfairy10 5y ago

Because there will be an annual interest rate to borrow and there is always margin call risk given the vol of crypto