Mark Moss explains why he borrows against Bitcoin instead of selling it. Bitcoin has returned roughly 55% per year over four years, while loans secured by Bitcoin cost around 10% interest. Borrowing lets you keep your Bitcoin, avoid capital gains taxes, and still get the cash you need.
And Bitcoin is no different. My bank will give me a loan against my stock portfolio, and I can also get a loan against my Bitcoin portfolio, not from my bank but from other lenders. Now, I can borrow against your Bitcoin, and I would do that instead of selling it. And the reason why I'd want to do that is right now, for the last 4 years, Bitcoin's been going up by about 55% a year. So I could either, one, I could sell the Bitcoin, I could pay the tax on that, and then I have no more Bitcoin to go up at 55% a year. Or I could borrow against the Bitcoin, let's say at 10% interest, but it's going up at 55% a year. So I still have the Bitcoin balance going up and I'm only paying a small percent of interest doing this. Now, an example of this would be you, you know, you or your business could hold your reserves in Bitcoin, save your money in Bitcoin. And when you need the funds for expansion to grow your business, then instead of selling the Bitcoin, you would borrow against the Bitcoin. And then you would preserve that position while, you know, getting the cash that you need to continue growing the business. And the best part is you avoid any tax penalties because when you sold it for profit, you have to pay the tax on it.
