Re: Wall Observer BTC/USD - Bitcoin price movement tracking & discussion

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Main theme: You still have keys to your btc, but able to lend it out.

Sorry, Biodom, but the above highlighted statement doesn't make any sense. Either you misread it, or they're lying to you.

Believe me, I am skeptical myself and so far never lend out any, but you can call me curios since there is no tax event, no wrapping and no cough-eth-cough involved.
Here is what that head honcho says (scroll down to especially 6-9 in the thread)...and don't shoot the messenger:
https://twitter.com/muneeb

my guess would be that most risk would be that btc price growth might exceed the posted collateral. If so, this might be a weakness.
Is that head honcho trustworthy himself? Remains to be seen, but they were associated with George Gilder afaik.

Aha, now I see. Lender makes a btc transaction to the borrower. So, no longer the lender's keys. This checks out.

If the btc are not back by the given time, the collateral is released (to the lender, I suppose). So the risk would be an insolvent borrower AND the collateral not covering the "new" value of btc at loan expiry. This also checks out.

What does not check out is the following. Imagine being the borrower. Imagine being asked for, say, 200% collateral. Maybe in USDC/USDT? OK. So at expiry, if the btc you borrowed is worth more than the collateral, why give the loan back? Let the lender just have the collateral. On the contrary, if the btc you borrowed is worth less than half the collateral, give it back of course, and keep your relatively precious collateral. In other words: a shorter's paradise. Am I missing something? It's obvious I am, but I don't know exactly what - or I wouldn't be missing it Cheesy

Another thing that escapes me: if you can post, say, 100k usd collateral, why would you borrow a bitcoin rather than buying one - or two? For simplicity, I'm assuming 1btc = 50k$.

Biodom, have you been able to figure this one out?