No single ticker was named. Bitcoin ETFs are one way for retail investors to get exposure. Not a recommendation.
Hedging eliminates liquidation risk in crypto loans
The guest argued that platforms can offer liquidation-proof Bitcoin-backed loans by charging an upfront fee to purchase derivatives that hedge downside risk on the platform's balance sheet.
The argument
To protect borrowers from overnight market wicks without requiring them to over-deposit collateral from cold storage, Strike utilizes an internal options desk to buy puts, backstopped by Tether's balance sheet. If the collateral value falls below the loan value, the appreciating value of the puts offsets the balance sheet deficit, allowing the borrower to avoid liquidation.
The thesis, stress-tested
✓ What validates it
- ✓Integration of the liquidation-proof loan feature directly into the Strike retail app
- ✓Reduction of the origination fee below the current 3% level as volume scales
▸ Risks discussed
- ▸High volatility can make options hedging too expensive to offer
- ▸Potential default by the borrower if the collateral value drops below the loan value at expiration
- ▸Dependence on Tether as a balance sheet backstop
Hear it yourself
"So one way that you can monetize and build a business around currency debasement and this current era of fiat that we're in is provide a place for people to speculate. Because the reality is whether people know it or not, they're all speculators. Because the currency that they're getting paid in and that they're forced to use via their government is being debased. And so you can't actually just save in the money that you're forced to use via law. You have to turn that money into something that can actually preserve purchasing power and that you can save in. And so whether everyone knows it or not."
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