Bitcoin continues to become the most pristine collateral asset

Investor · Oakland CA & Las Vegas NV · Member since 2019 · 72 posts · 112 votes

Milo, a US-based lender is now offering bitcoin-backed mortgages with no downpayment, no credit requirement, no DTI, no bank statements, and 100% financing. This is the start of exciting disruption and innovation as the digital assets space matures and further melds with traditional and antiquated finance.

Stack sats, use them to fund real estate without sacrificing the appreciation, invest the gains from real estate to stack more sats, repeat.

Bitcoin is the most pristine collateral asset that exists today.

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Bob E.

Queen Creek, AZ · Member since 2014 · 2k+ posts · 1k+ votes

I still think Bitcoin has as much value as Dutch tulip bulbs. But hey, maybe this time really is is different.

It will be interesting to watch how the crypto market does during the coming recession.

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Michael K GallagherBusiness Member
Real Estate Agent · Columbus OH · Member since 2018 · 1k+ posts · 1k+ votes
4y
@Rob Kishi elaborate on what you mean by a "bitcoin -backed" mortgage. Are you paying for the mortgage in bitcoin? because unless your are paying for the real estate in bitcoin...you still need to liquidate into USD to purchase real-estate yes?
[email protected]614-362-2231
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Rob Kishi
OP
Investor · Oakland CA & Las Vegas NV · Member since 2019 · 72 posts · 112 votes
4y
My understanding is you provide the total cost of the home in bitcoin and Milo would supply the USD to purchase it. They would obtain custody of your bitcoin while you pay down your loan to them over time. There would be no taxable event as you are not technically selling your bitcoin, but rather sharing it as collateral while Milo finances your home's debt. As your loan is paid down (or bitcoin goes up) you can withdraw the relative amount of bitcoin as long as you stay within a 1:1 LTV threshold.
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Bob E.
Queen Creek, AZ · Member since 2014 · 2k+ posts · 1k+ votes
4y
I still think Bitcoin has as much value as Dutch tulip bulbs. But hey, maybe this time really is is different.
It will be interesting to watch how the crypto market does during the coming recession.
15 Reply
Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
4y
Quote from @Rob Kishi:

My understanding is you provide the total cost of the home in bitcoin and Milo would supply the USD to purchase it. They would obtain custody of your bitcoin while you pay down your loan to them over time. There would be no taxable event as you are not technically selling your bitcoin, but rather sharing it as collateral while Milo finances your home's debt. As your loan is paid down (or bitcoin goes up) you can withdraw the relative amount of bitcoin as long as you stay within a 1:1 LTV threshold.
What happens of this whole thing crashes and burns?
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John M.
Investor · Fairfax, VA · Member since 2015 · 1k+ posts · 796 votes
4y
A bitcoin backed mortgage? The problem with that is that nothing backs a bitcoin! So when bitcoin crashes do they recall the loan or take possession of the property?
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Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
4y
Quote from @John M.:

A bitcoin backed mortgage? The problem with that is that nothing backs a bitcoin! So when bitcoin crashes do they recall the loan or take possession of the property?
That's my main worry too.
3 Reply
Rob Kishi
OP
Investor · Oakland CA & Las Vegas NV · Member since 2019 · 72 posts · 112 votes
4y
The statement "nothing backs bitcoin" isn't necessarily true. What backs the dollar, or any other nation's currency for that matter?

Money throughout history is always "backed" by the same thing: trust and technology. Just as debit cards, Venmo, and PayPal are better technology than paper and checks, and metal coins are better than shells and spices, decentralized, uncensorable, and digital assets are better technology than the state-run fiat system we unquestioningly accept today. Bitcoin is digital value just as email is digital information. Do you communicate through hand-written mail or email?

Bitcoin's decentralized nature creates a trustless environment where you don't need faith in governments, counterparties, banks, or anyone else but yourself and math. Whether you trust these entities today or not, it is clear that freedoms are sacrificed when choosing to live under government-sponsored monetary regimes (see recent events in Canada and Russia). The true value of bitcoin doesn't come from its price or "backing" but rather from the corruption, limitations, and inherent weaknesses of the existing financial system.

It takes quantifiable, measurable, and provable amounts of energy to create a bitcoin. What does it take to make a dollar?

https://fred.stlouisfed.org/se...

Regarding the crypto mortgage, I'm assuming they lien the property, and you would need to maintain their required minimum 1:1 (bitcoin:loan amount) LTV. You're basically highly over-collateralizing your liability with bitcoin to either qualify, avoid carrying the debt on your personal financial record, or avoid the down payment. It's admittedly not as strong compared to a conventional loan at today's prices from a cost of capital perspective (given how much bitcoin you have to lock up), but that could change depending on the rate of growth in bitcoin vs. the housing market. It is a first-gen product, and we will see many more accretive ways of leveraging bitcoin and other digital assets over time. Technological change and adoption cycles happen gradually, then suddenly.
17 Reply
Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
4y
The banking system today isn't backed by nothing...and it isn't chaos,...although it may appear to be just that. There are controls built into the virtual money we work with today. Virtual money today is based on performing assets, and also penalized by non-performing assets. What you're talking about has none of these controls in place...and ultimately that will be its downfall, and the downfall of all that count on it as an investment.
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Rob Kishi
OP
Investor · Oakland CA & Las Vegas NV · Member since 2019 · 72 posts · 112 votes
4y
There's not a lot of specifics or facts in your response, so I'll pose a few more questions:

How many currencies (and economies) has the world seen come and go over the last several centuries? Is that because they resembled and practiced sound monetary principles or weak ones?

Does the US monetary supply (pictured below) look like "control" to you? How do you think governments will handle future economic calamities when they happen?

Remember when it was not possible to print money out of thin air?

Believe it or not, money was once backed by more than just the government's good graces, and for good reason. It has been over 50 years now since the United States decoupled the national currency from its gold reserves and changed the course of economic history.

source: https://fred.stlouisfed.org/se...

The fact of the matter is that all nation-based currencies trend to zero over the long-term due to increasing government debt, supply expansion (to finance the economy), or societal collapse. We've seen/are seeing it happen in ancient civilizations (fall of Rome) and contemporary ones (Turkish Lira, Argentinian Peso, Venezuelan Bolivar, several countries in Africa and the Middle East, and most recently the Russian Ruble). Why do you think several countries have to "adopt" the dollar? Do you think it's because they believe it's so amazing they want to run their entire sovereign country on it?

I'm not saying the financial system doesn't provide value and do recognize that Bitcoin's story is still very early days, but it doesn't take much to see the current way of doing things is not sustainable. There will be generational ramifications for the unprecedented events happening today, no way around it at this point.

Being a great investor is predicting the future and buying some of it. We all have a choice to make, and resisting change (especially in today's economic climate) can be costly. Denying the fact that digital assets are going to play a major role in the global economy of the future is like denying the internet's disruption back in the late 90's or early 2000's. The only real doubters were those that didn't fully understand it or the impacts it would have on the status quo.

There are actually much more reliable and transparent controls governing Bitcoin than any administration-sponsored paper money has. It may be beneficial going a bit deeper into how money, fractional reserve banking, and Bitcoin work. There's a lot of content online if you'd like to do more investigation.
18 Reply
Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
4y
Your post just now went in so many circles that my head is spinning. You have been rationalizing, or ignoring the LACK of control in the system you are falling in love with.
Do you actually understand how the current banking system works? Maybe you're the one that needs to do a little more research.
2 Reply
Rob Kishi
OP
Investor · Oakland CA & Las Vegas NV · Member since 2019 · 72 posts · 112 votes
4y
Thanks for the suggestion Joe!

I always do my research. :)
7 Reply
John M.
Investor · Fairfax, VA · Member since 2015 · 1k+ posts · 796 votes
4y
Bitcoin is not a currency, it is classified as an asset by the IRS. Unfortunately this is an unstable asset that has no regulation, government or bank that will support it, so buyer beware! My point being that mixing virtual assets (risky collateral) with physical assets (more stable collateral) is a bit risky at this point in the game. I used to own a bitcoin business believe it or not, and took my proceeds and invested into stable commercial real estate assets.
5 Reply
Rob Kishi
OP
Investor · Oakland CA & Las Vegas NV · Member since 2019 · 72 posts · 112 votes
4y
Bitcoin is classified by the IRS as property so by definition it is regulated in the US. Any informed regulator should be able to confirm. Several governments outside the states support it, and this list will only grow. A quick google search will provide the details.

Banks are naturally going to be the last to support crypto, just as pager salesman were the last to support cell phones. It doesn't change the fact that pagers no longer exist and billions of people around the world have a cell phone. Bitcoin and other bearer assets remove the need for a bank and allow you to take responsibility for your own wealth instead of giving it to a bank earning 0.05% while they lend it to five other parties and think you're saving (don't forget inflation is 10-15%). When you give your money to a bank, it's no longer your money its the bank's money.

If you believe bitcoin is the risky asset, you may not fully understand its fundamentals (digital scarcity). Volatility does not equal risk, volatility is the market uncovering its value and crypto will crash all the way up as it disintermediates finance. The dollar is the risky asset my friend; we should all know where that's going.
8 Reply
Rob Kishi
OP
Investor · Oakland CA & Las Vegas NV · Member since 2019 · 72 posts · 112 votes
4y
Your kids (or their kids) will not need a bank and the generation after will surely not have one.
2 Reply
Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
4y
OK. Let me ask a question. If/when bitcoin fails, what will cause it, what path will that failure take, and who will it take down with it?
OK,...so that was 3 questions, or maybe it was still just 1 question with 3 parts to it.
1 Reply
Rob Kishi
OP
Investor · Oakland CA & Las Vegas NV · Member since 2019 · 72 posts · 112 votes
4y
What's the weather like in 10 years Joe?

Joking aside, the biggest risks to bitcoin are quantum computing enabling a 51% attack/double spends, the internet crashing, highly coordinated government attacks, or the apocalypse. Ironically there are also counter-arguments to all of these outcomes. If any of these happen, you have bigger concerns than the price of bitcoin.
As I mentioned before, it all comes down to where you place your trust. Choose wisely.
2 Reply
Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
4y
Quote from @Rob Kishi:

What's the weather like in 10 years Joe?

Joking aside, the biggest risks to bitcoin are quantum computing enabling a 51% attack, the internet crashing, highly coordinated government attacks, or the apocalypse. Ironically there are also counter-arguments to all of these outcomes.
You do realize that every time you comment on my comments, you make my point?
Next question. Is bitcoin a necessity? Is housing a necessity?
1 Reply
Rob Kishi
OP
Investor · Oakland CA & Las Vegas NV · Member since 2019 · 72 posts · 112 votes
4y
When did I say housing was not a necessity?

This is proving to be a waste of time. Have a good day!
2 Reply
Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
4y
Quote from @Rob Kishi:

When did I say housing was not a necessity?
This is proving to be a waste of time. Have a good day!
I never said you did. All I asked was a simple question. Instead of asking how that question pertained to this discussion, you took defensive.
A good investor should never get emotional about what they invest in. It clouds their judgement.
By the way. I too have money in bitcoin. It's obviously doing very well. I'm using it as a quick way to generate cash for REI down payments. I don't know how long it will play that role, but the amount I have in it is just enough to serve its purpose, but not too much for when it fails.
3 Reply
Rob Kishi
OP
Investor · Oakland CA & Las Vegas NV · Member since 2019 · 72 posts · 112 votes
4y
Good investors should believe in what they invest in Joe, you knew that right?

There's no such thing as a get-rich-quick scheme, and be careful playing with fire if you can't handle the heat. You might get burned.
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Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
4y
Quote from @Joe Villeneuve:

Quote from @Rob Kishi:

My understanding is you provide the total cost of the home in bitcoin and Milo would supply the USD to purchase it. They would obtain custody of your bitcoin while you pay down your loan to them over time. There would be no taxable event as you are not technically selling your bitcoin, but rather sharing it as collateral while Milo finances your home's debt. As your loan is paid down (or bitcoin goes up) you can withdraw the relative amount of bitcoin as long as you stay within a 1:1 LTV threshold.
What happens of this whole thing crashes and burns?

Your Comment: "What happens of this whole thing crashes and burns?"

That's actually more likely than people in the industry are wiling to admit:

1. Your disk drive fails in a irretrievable crash

2. Someone steals your laptop

3. You buy a new computer and you accidentally throw away the wrong computer

Man who accidentally threw out a bitcoin fortune offers $70 million for permission to dig it up

https://www.cnn.com/2021/01/15...

4. BItcoin gets hacked

Feds Seize $3.6 Billion In Stolen Bitcoin, Arrest Couple

https://www.forbes.com/sites/j...

5. You've finally made it, you are now Bitcoin rich and you are leaning on the railing of the cruise ship looking at all your Bitcoin wealth and the cocktail waitress bringing you your pina colada bumps you and you drop your computer into the ocean.

6. Your kid uses your computer when you're not home and goes to a website not so kid friendly and malware is loaded onto your computer that locks the computer until you pay the ransomware. That's bad enough but this malware reinserts itself from the pre-boot module so you can never get rid of it. But, this time it doesn't announce itself, it just sits there as a key logger and sends everything you type and every site you go to, to your new unknown contact in Bulgaria. So, I guess that means it sends whatever Bitcoin information you have as well.

7. You have a terrible breakup in your relationship and she/he throws the compter out the window or into the garbage or into a lake or runs over it with a car

Woman Threw A Computer Through A Windshield

https://www.edhat.com/news/wom...

and then there are the obvious:

8: An electrical failure during a storm and it fries the drive

9: A house fire and the computer melts

10: You put it on top of the car as you are getting things out of the backseat and in your haste forget about the computer and next day drive away with the computer on top. It falls off at 7th & Main but you don't know & don't realize it until you get 32 miles down the freeway to your morning appointment. It could be anywhere and how many people would try to track you down to return it? Since you have a password on it no one can sort out who you are.

11. And one of the most likely, a flood. The waterheater bursts, the pipe in the bathroom upstairs pops, a hose on the clothes washer breaks, a hurricane blows through and floods, a tornado with lots of rain and your computer is somewhere in farmer Jones' field 50 miles away (it didn't survive the impact unfortunately).

12. And I don't know if this can happen, you forget the password

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Rob Kishi
OP
Investor · Oakland CA & Las Vegas NV · Member since 2019 · 72 posts · 112 votes
4y
These are fair in relation to custody risk, not the bitcoin network itself. With crypto comes responsibility. The point is you have the choice to manage it yourself if you wish.

Also, crypto wallets exist in cyberspace (think of it as a digital locker). As long as you have your seed phrase you can always access it regardless of whether the physical device you used initially is damaged or compromised.
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Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
4y
Quote from @Rob Kishi:

These are all fair in relation to custody risk, not the bitcoin network itself. With crypto comes responsibility.
The point is you have the choice to manage it yourself or use a custodian.

Is this not a risk outside of your control?
4. BItcoin gets hacked

Feds Seize $3.6 Billion In Stolen Bitcoin, Arrest Couple

https://www.forbes.com/sites/j...
0 Reply
Rob Kishi
OP
Investor · Oakland CA & Las Vegas NV · Member since 2019 · 72 posts · 112 votes
4y
Bitcoin has never been hacked...they left their private key in cloud storage aka irresponsibility.
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Account Closed
Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
4y
Quote from @Rob Kishi:

Bitcoin has never been hacked...they left their private key in cloud storage aka irresponsibility.

I'm not quite sure what you are trying to get at: If you take the time to read the artice it says:
"$4.5 billion worth of bitcoin stolen during a hack of cryptocurrency exchange Bitfinex in 2016,"
Now, i'm guessing Bitcoin needs an exchange or it is totally worthless, so your comment is
"A distinction without a difference"
It's a type of logical fallacy where an author or speaker attempts to describe a distinction between two things where no discernible difference exists
But, don't worry, I don't think anyone is buying what your selling. Perhaps you should stick to real estate since this is actually a real estate forum.
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