As part of our on-going Tweetstorm Series, we showcase excellent Twitter threads on the most interesting topics in the industry and publish them here on Decentralize.Today
Today we feature Aaron (Fiat Minimalist), an ex-central banker at The Monetary Authority of Singapore now based in Hong Kong and Singapore working at the OTC desk of Llamabrothers.com. His recent tweetstorm talks about Bitcoin's path towards becoming a super-collateral for the global financial market.
Read and enjoy:
Bitcoin is quickly evolving into an asset that will become the ultimate form of collateral. Have been hearing more traditional funds and groups willing to accept BTC as collateral in return for fiat loans at ~6-12% per annum. The latest I know of is a traditional global multi-family office that specializes in share-backed loans, and now have just branched out to BTC-backed loans.
Typical collateralized assets in today's markets are:
1) Real estate
As Bitcoin continues to capitalize, its volume will approach & fall in-line with these categories of assets. Its liquidity will exceed even the most liquid shares (and BTC loans will become the cheapest, fueling more demand for BTC as the highest quality collateral) ---> reflexivity.
With the exception of volatility, Bitcoin scores (or will soon score) better than all other assets in all "what makes a good collateral" dimensions such as:
Speed and ease of settlement
Unlike most assets, Bitcoin is a bearer asset so its clearly unencumbered. Once lender is holding on to the actual BTC they can be sure it hasn't been pledged to 10 other parties simultaneously. Also cheaper & more efficient than paying for title deed searches, lien enforcement, etc.
Bitcoin can be liquidated 24/7 and almost immediately - unlike real estate which can sometimes take >1 year for resolution, or shares/bonds which only trades certain times during the day for which liquidity tends to dry up during periods of stress
Only a matter of time before banks begin accepting Bitcoin as collateral, and they'll have to build out infrastructure to manage Bitcoin borrowing/lending.
About the Author
Aaron (Fiat Minimalist is an ex-central banker from The Monetary Authority of Singapore now based in Hong Kong and Singapore working at the OTC desk of Llamabrothers.com. Check out his twitter @FiatMinimalist for more of his insightful tweets about Bitcoin and its intersection with the financial markets.