Crypto CRASH Survival: Master Your Bitcoin Credit Now! | Bitcoin Education | Hashpower Academy

Video Transcript:

hello there and welcome to the hash power Academy this is a place where we talk about anything and everything related to Bitcoin mining energy the blockchain hardware software you name it we cover it and today’s topic is crypto credit which is more of a financial service offered on many different digital asset platforms where you store your Bitcoin in this example with the platform they custody it and you’re borrowing against it where say you’re borrowing 50% of the value of your Bitcoin and in this case we would have a 50% loan to value and these sorts of markets Services uh they have their risks and they have their rewards on the risk side you’ve got the credit which is creating a flaw and a danger zone if the dollarized value of your Bitcoin were to drop in this case 40% they’ll start selling all your Bitcoin at a point that it’s all dropped by 40% which seems like you should be on the opposite side of that trade that if you feel like you keep hitting that point that you’re having to manage a collateral position or getting liquidated that’s the time you should have been buying and the collateral is the reward if you’re not selling it like a you know you’re not you’re not borrowing against it if you were selling it you would create a tax implication and you’re missing out on the upside of that Bitcoin which which is the reward side of taking credit instead of spending the Bitcoin if you take on credit the appreciation of your collateral is yours but remember the dollarized value of your Bitcoin may have a compound annual growth rate of 30% so that’s always creeping up but it doesn’t creep up in a straight line it may drop 40% it may shoot up 1,000% but if it drops below these sorts of lines you get liquidated so the worst thing that could happen is you open up a loan position take on credit whether it’s to buy more Bitcoin or manage your own expenses or invest in something else whatever it is the whole point is this whatever your loan to value rate is that is the point in which if it drops below that so volatility can shake you out of this trade in a sense um you need to manage your your loan to value the best advice I can give which is still not Financial advice is whatever they offer you in terms of the percentage of loan to Value never go further than half half halfway like 25% means that the price of Bitcoin could drop 70% and you’re probably just about in the clear which is still a a safety margin and you could still manage that by topping it up slightly so never never borrow to the maximum that they’ll allow you to borrow and even in this case I still wouldn’t recommend loaning against your Bitcoin in any sh in any shape or form because you are having to store and allow that Bitcoin to be custodi by someone else so it’s in the hands of someone else and if that platform was to blow up you’ll uh you’ll be chasing some legal claim where the lawyers take half of it and the other half is given to you back at the dollarized value of four years ago that’s not what you want so if you are going to take the risk to get the reward of being able to spend something that that is custodi by something else by borrowing against it you’re essentially having your cake and eating it at the same time you’re getting a lot of risk for some upside reward it’s danger and uh I don’t recommend it but what’s going to happen in in this future of Bitcoin Banks and traditional Finance offering Bitcoin products markets and services well they’re going to offer lucrative things they’re going to offer any reason to to deposit Bitcoin into their platform into their Bank into their solution um and offer some and all offer all different financial services against it so um yeah hope this was an insightful video and there’s all the all the all other different pieces to this but the key thing is that the loan to value is that clear metric of the dollar value of the credit and the dollar value of the Bitcoin and that’s the most important thing volatility can shake you out so don’t raise your risk keep it low if you’re going to because it allows the the price of Bitcoin to be able to to be able to drop without you uh being in danger territory and as I said if you keep repeating the experience of having to manage some uh loan position that get that blows you up that exact position that blows you up was probably the best time to be buying before the price shoots up again so don’t take too much risk and time the market right thank you for listening hope you enjoy cheers