Wednesday, June 8, 2022

BTC vs. Loans

The primarily logical reason you can't take out a BTC loan is because it's highly volatile.

There's lots of other reasons too, all individually fatal. 

It's highly volatile because it's not yet the bubble that doesn't pop. It partially-pops all the time.

We know effectively nothing about our fellow citizen because we all live in extremely thick-walled bubbles, and it's not like journalists have any interest in writing about other bubbles. Some of those bubbles come to see BTC as a bubble and, inside those bubbles, the BTC bubble pops. However, the thick-walled bubble prevents the popping from going all that far, meaning BTC, like gold, never loses all of its value.

Because BTC is volatile, pricing a loan is a complete nightmare. You can't just say, "I give you 100 BTC now and you give me 110 BTC in ten years." The risk of default is a function of current BTC price, which means interest has to be a function of current per-capita BTC market cap. (Which you don't even know.) Better: the default risk goes nuts if BTC goes too low or too high. It's not exactly a nice well-behaved linear function. 

There is also a political reason. If you offer BTC loans you will 100% be classified as a bank and have to follow all the Communist bank regulations. As per Bear Stearns and Lehman Brothers, this includes paying bribes and kickbacks to your krysha. Only you have to pay decuple because the SEC, IRS, Eccles Building absolutely despise BTC, as it threatens their hog trough.

Tertiarily, since nobody gets paid wages in BTC, there's always round-trip conversion costs, meaning unnecessary friction. You can make a dollar loan that's isomorphic to a BTC loan by setting the interest rate correctly. 

Quaternarily, you may note that none of the above interest rates are competitive. Who would buy a loan with 20-25% interest? Lots of folk would love to sell such a loan, but the Eccles Building is right there. They have lots of spare no-money-down 0.5% interest-rate loans with an "eh, fuck it" attitude toward defaultees, since they loan virtual money instead of real money. Fundamentally someone in e.g. Honduras owns dollars so they can buy oil, and then the Eccles Building loans that dollar to you without their consent or even necessarily their knowledge, so why would the Fed care if you default? Not their money.

P.S. Non-BTC crypto are penny stocks. It's not like penny stocks don't have value, but... When someone says "Crypto is X" they are unquestionably equivocating. Are they talking about the real stocks or the penny stocks? Usually they're right about one category and not the other. (Shocking.)

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