00:00In today's video, I want to discuss why institutions are actually now building credit markets around Bitcoin, right?
00:07So Bitcoin's next major financial role seems to not simply be one of a speculative asset or a passive store
00:17of value, right?
00:18It might be that the shift is now moving towards a programmable collateral.
00:25And I'll explain why, because if you think about what the Bitcoin space is today, you know, you have cash
00:34and stablecoin loans and Bitcoin is able to now support that.
00:39You've got support of institutional credit facilities and treasury working capital and also DeFi borrowing, trading and market making finance
00:50is also involved,
00:52as well as things like on-chain economic security and not forgetting also cross-market settlement.
01:00So I think the appeal at this particular point in history is definitely clear in that a holder is now
01:08able to effectively unlock liquidity without immediately selling their Bitcoin.
01:14But I think we always need to pay attention to the fact that the risk is equally clear in that
01:21once Bitcoin supports debt obligations,
01:25a market decline can become a margin call, a forced kind of collateral transfer, liquidation or a tax event, a
01:36counterparty loss and also a wider leverage cascade, right?
01:42And what I've gone in actually done is create a guide that examines sort of the emerging Bitcoin collateral economy
01:52across custodial lenders,
01:54DeFi protocols, wrapped Bitcoin markets, as well as native BTC systems and in fact, institutional credit structures.
02:03And what it does is it covers a lot of things, but in particular loan to value ratios.
02:09We also look at things like liquidation, price calculations and custodial versus non-custodial lending,
02:17REB BTC, CB BTC, TBTC risks, as well as kind of borrowing of stable coins in institutional collateral markets
02:29and rehypothecation, right?
02:32Bitcoin treasury strategies.
02:34We also dive into yield and leverage traps and responsible collateral use framework.
02:42And I think the most important lesson that I would take away from that is the fact that the platform's
02:49maximum LTV is not a responsible borrowing target, right?
02:53The borrower should always ask what LTV can survive a 40 to 60% Bitcoin decline, which is typical in
03:02Bitcoin cycles requiring without actually requiring kind of an emergency transfer or refinancing or a forced sale.
03:11So the intention of how I created the guide is just to include this proprietary Bitcoin collateral risk calculator that
03:21estimates the starting LTV,
03:24the interest adjusted debt, the liquidation price, price decline to liquidation and collateral buffer,
03:31as well as additional BTC that's required and the stress scenarios, right?
03:35So I think Bitcoin at the end of the day can become more financially useful, but that doesn't make a
03:42debt safe, right?
03:43The future of these Bitcoin bank credit markets will depend on transparent custody, conservative LTV design,
03:52as well as a kind of just having those predictable liquidation and limited hypothecation.
03:59And I think that's really what will make it maybe a much more of a credible and sustainable capital market.
04:10So let me know what you guys think.
04:12Check out the links down below.
04:13You can check out the full guide.
04:14You can check out the calculator as well.
04:18And just kind of play around with that.
04:20The most kind of trusted cryptocurrency exchanges that I like to use are all in the description.
04:27You can go to our main site and check out all our comprehensive guides.
04:31Like, share, subscribe and turn on the notifications, guys.
04:34I will see you in the next videos.
04:36Peace.
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