What you should know about the Bitcoin-backed bank loan debate

Could your next loan be backed by Bitcoin in a few years? Isn’t that a mind-boggling concept? And that’s exactly what investment expert Anthony Pompliano and Schiff Gold Chairman Peter Schiff debated on Pompliano’s business show.

Bitcoin in the house, literally

Could Bitcoin help you buy your new home? As Schiff noted, volatility would be a concern for many. However, Pompliano discussed two main aspects that could make this possible – The divisibility of Bitcoin into satoshis and a liquid market.

Using a hypothetical example, the exec said,

“I can sell a piece of the Bitcoin into the market…I could sell $1,000 at time if I wanted, and I can make sure that I will never lose money on the loan. Because I can always liquidate the over-collateralized piece that I have, to prevent any sort of default.”

Meanwhile, Schiff compared loaning against Bitcoin to using stocks as collateral. However, he was firm in his belief that individual small shares could also be sold like Bitcoin.

Golden eye

For his part, Schiff pointed out the risk of people missing out on their margin calls due to a drop in Bitcoin’s price. He also expressed his worry that banks might liquidate people’s Bitcoin under such circumstances, leading to market dumps. He said,

“The reason I think loaning against Bitcoin is inherently riskier than loaning against stocks… is that I think that Bitcoin is more volatile than stocks… more prone to a big move.”

As expected, Schiff wasn’t very bullish on the idea of El Salvador’s volcano bonds. Here, it’s interesting to note that macroeconomist Lyn Alden called this plan the “Michael Saylor playbook for a country.”

Break out the chips

As previously reported, 39,000 Bitcoin were reintroduced into crypto-exchanges. However, as of press time, the price of Bitcoin was $48,507.42, down 13.62 percent in a single day. Many people were debating whether or not to buy the dip, but two major players in the sector had no doubts about what they needed to do.

El Salvador’s President, Nayib Bukele, claimed the country had purchased 150 coins. Following suit, Bukele challenged Tron founder Justin Sun to step up his game. It soon appeared that a competition was in the works.