Rich bitcoiners will manage their money through collateralized loans, says FiatHawk.
With collateralized loans, the selling pressure of bitcoin would be reduced.
In a recent exchange of ideas on X it was discussed How Bitcoin (BTC) Collateralized Loans Could Fundamentally Transform Economic Cycles associated with this digital currency.
The bitcoiner influencer who identifies himself with the pseudonym “FiatHawk” suggested that The use of loans collateralized by bitcoin will significantly decrease selling pressure. That is his basis for claiming that the growth of the lending industry will put an end to traditional bitcoin cycles as we currently know them.
Before continuing with the story, let us clarify that loans collateralized in bitcoin allow the holders of this digital currency to obtain liquidity (in fiat money or a stablecoin) without having to sell their assets.
These loans work similarly to a mortgage loan, where bitcoin acts as collateral. This method prevents the holder from having to liquidate their bitcoin holding, which not only eliminates selling pressure but also sidesteps the tax obligations that typically accompany fiat gains.
Bitcoin cycles, typically marked by halving events every four years, are characterized by significant fluctuations in price. Each halving—as explained in Criptopedia, the educational section of CriptoNoticias—halves the reward miners receive for adding a new block to the network, a mechanism designed to control bitcoin inflation.
Historically, these cycles have seen a trend of rising bitcoin price in the months following the halving, followed by an eventual fall (crypto winter).
FiatHawk argues that By reducing the need to sell bitcoin to realize fiat profits, collateralized loans could ease selling pressure that typically accompanies these cycles.
«In the past, to enjoy fiat profits, you had to sell your bitcoin. This creates sales pressure and creates a tax liability,” explained FiatHawk. «In the future, you take out a loan against part of your bitcoin. There is no sales pressure and there are no taxes,” he adds.
However, this optimistic view is not without criticism and potential risks. Podcaster Robert Breedlove responded to FiatHawk by pointing out that loan payoffs can create selling pressure.
In severe bear markets, if the price of bitcoin falls below certain thresholds, lenders may require borrowers to add more collateral or sell some of the bitcoin to maintain the collateral level, which could intensify supply. That, by simple law of supply and demand, would produce falls in the price of BTC.
FiatHawk does not deny these risks, “especially if there are many irresponsible actors,” he maintains. In any case, it reiterates that He hopes that with the maturity of the market, the price will stabilize and the falls will not be so pronounced.
In the long term, FiatHawk remains optimistic about the role of bitcoin collateralized loans in transforming access to liquidity without triggering sell-offs. “As Bitcoin matures, I think this is how the rich will leverage their capital, enjoy their lives, and avoid taxes on Bitcoin profits,” he projects.
