I've seen a lot of long term bitcoin hodlers talk about how they will never sell, instead if they need money they will take out collateralized loans, and later pay off those loans with other collateralized loans, possibly dying with fiat debt but still the same number of bitcoin.
I'm curious how people feel about this? What's your plan?
I have a stash of BTC that I plan on dipping into when I start having kids (soon) so that I can give them better lives and spend more time with them. I don't plan on quitting my job that I really enjoy so I won't need to supplement that much, but want to put it to use.
Will I sell a piece every month for living expenses or will I take out collateralized loans?
The theory of the loans is great. Over time fiat goes down while bitcoin goes up. If you keep on taking out new loans to pay off the old loans over time you won't have had to sell anything and your collateral is a small fraction of what you would have sold.
I see a big problem with this though, and I wanted to see how people felt about it. In order to take out a collateralized loan, you usually need to risk 2-4 times the bitcoin. For instance, I could sell one coin today for $55k, but to get a $55k loan I would need to collateralize 2-4 bitcoin. Part of collateralized lenders insurance to their business plan is to liquidate the collateral if the value drops to a certain point. Occasionally these volatility events happen and they could wreck you. Over a short term period this isn't very risky to the borrower. (I personally took out ~$35k in collateralized loans in Celsius last year as the price ran up to buy more BTC but have since closed out the loans). The problem is if you are holding a collateralized loan in perpetuity that liquidated at a certain price, eventually such an event will happen and liquidate you, right? Add on to this the risk of the lender ever defaulting, which is also possible but harder to measure. In the end you'll have spent 2-4x more bitcoin than if you had just sold for what you needed.
My feeling for myself is that I'm winning enough already and don't need to take on more risk. Therefore if I need an extra $10,000 next year, I'll sell rather than take out a loan. BUT, I'm open to being influenced that I should use perpetual loans instead.
What have I missed? How do you feel about it? What would you do? What will you do?a
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