Yes and you end up controlling things because if you are near the time where they will call the loan, you can always add more collateral. It could be built in like overdraft protection.
Plus, the underlying asset could keep appreciating while you are paying back the loan. Imagine being able to do that with a lot of things.
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Or the asset could deprecate a bunch and you are going to need a whole ton of collateral. I wonder how well this system works for the people who FOMO and buy in at the top.
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The value of the asset isnt really an issue I dont think because the collateral is not the asset. Thus, in the example, the Bitcoin price is the variable.
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Yes but if you were already taking the loan near the max and Bitcoin drops, you have to add more collateral. So what happens when BTC gets the normal 50%+ drops at the end? I find it is going to be tough for people to make up the difference sometimes.
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Yes well that is why they do not give 100% on the BTC.
So in the example, $200K in BTC collateral for a $100K house. If the price drops 50%, then they either be liquidated or they will have to put up more BTC as collateral. The house could have gone up or down but that isnt really part of the equation.
If they have no more BTC, the collateral is taken and the house is still theirs.
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