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50 sats \ 7 replies \ @0xIlmari 13 Feb \ on: How fiat will kill itself econ
Leveraging yourself to buy Bitcoin is risky. Michael Saylor has a whole department of people working on making it safe for him and the company. Do you?
I'd say if you're a boomer with £1m in your pension and have just discovered Bitcoin, you can rather safely borrow £40k against it to buy a whole coin.
And if your £1m pension suffers a 96% drawdown to wipe you out, you have a bigger risk-management problem, whether you're borrowing or not.
The point is, there is more nuance to leverage that just saying it's dangerous.
Another example: I own a house with a mortgage. My LTV is 30%, which is fairly low. The valuation of my house would have to drop by two thirds to liquidate it. That's very unlikely. If things get that bad, millions of people will get in trouble way before me, and the government will step in and "do something."
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There is also the question of whether the government will allow people's pensions to be wiped out due to a market drawdown, or bail them out with more money printing.
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Pretty sure every protection or insurance fund, be it for pensions or bank deposits has limits on size and generally holds enough money to bail out one, maybe two failing institutions.
In case of a systemic failure I'd assume all such schemes to be basically tits up and "please central bank bail us out of our idiocy so we can continue to scam our customers".