Borrowing money, Bitcoin and collateral is a combination of words that is becoming more common. The large American investment bank Goldman Sachs apparently also sees value in this, because the bank will offer Bitcoin-backed loans. This makes Goldman Sachs the first major American bank to work with Bitcoin in this way. Borrowing cash with your Bitcoin as collateral is for many maximalists a way to never have to say goodbye to their Bitcoin again.
Mortgage with Bitcoin as collateral
Suppose your entire wealth is in Bitcoin and you do not want to sell under any circumstances. Then you have a problem when you want to buy a house. However, Goldman Sachs’ new financing product seems to be the future in that regard. You don’t have to sell Bitcoin this way to indirectly buy things with your Bitcoin. At Goldman Sachs you can borrow money with your Bitcoin as collateral.
You will probably have to provide a decent funding ratio due to Bitcoin’s volatility. For example 2 to 4 times the value of the loan in Bitcoin to reassure the bank in question. In addition, the interest is probably higher on your mortgage if you put Bitcoin as collateral. But an interest rate of 5 to 7 percent is worth it if you expect Bitcoin to continue to rise by more than that interest rate on an annual basis.
In addition, this is a good thing for Bitcoin, because people now theoretically no longer need to sell to use their Bitcoin. Now Bitcoiners sometimes still sell their Bitcoin to make important purchases. We are now moving towards a future where that is no longer necessary and that will probably take a lot of selling pressure off the market. Which in turn is good for the price and confidence in Bitcoin, which can lower the interest rates on these loans.