Hi, today I want to share some super interesting news with you. Did you know that the US government is actually starting to research letting people use Bitcoin to apply for mortgages?
Sounds crazy, right? But it's true. The US Federal Housing Finance Agency recently started researching this possibility. I think this is worth talking about because it could change a lot of things.
What's this all about?
Think about it - normally when we buy houses, don't we always need to borrow money from banks? Then the house itself becomes collateral, and if you can't pay back the money, the bank takes the house away.
Now some companies are thinking, hey, what if you have Bitcoin? You can use Bitcoin as collateral with us, and we'll lend you cash to buy a house. This way you don't have to sell your Bitcoin and you can still get money to buy a house. Sounds great, right?
But wait, it's not that simple.
Why would anyone want to do this?
Let me give you an example. Say you bought some Bitcoin in 2020, when it might have cost just a few thousand RMB per coin. By now, wow, it's gone up several times! But you don't want to sell it because you think it'll keep going up.
At the same time, you want to buy a house and need a large sum for the down payment. The traditional way would be to sell your Bitcoin, but then you'd miss out on potential future gains.
So you're thinking, can I get money without selling my Bitcoin? Cryptocurrency mortgages solve exactly this problem.
What does this trend mean?
First, this shows that cryptocurrency is really becoming mainstream. Think about it - US government agencies are starting to seriously research this. What does that represent? It means they're no longer treating Bitcoin as some speculative toy, but really considering it as a valuable asset.
Second, this is a sign of traditional finance and new finance merging. These two worlds used to be separate, now they're starting to combine.
But the risks are huge
However, I have to tell you, the risks of this are really significant.
The biggest problem is that Bitcoin's price is just too unstable. Today it might be worth 1 million, tomorrow it could drop to 500,000. If you use 1 million worth of Bitcoin as collateral, borrow 700,000 to buy a house, and then Bitcoin drops to 500,000, the lending company panics.
They might say: "Hey, you need to add money quickly, or we're going to sell your Bitcoin." You'd be in a very passive position then.
Another issue is technical risk. Cryptocurrency operations are relatively complex, and if you mess something up, the money might be lost forever.
Some people are already doing this
Interestingly, while the government is still researching, some companies have already started providing this service. For example, there's a company called Milo, and Figure - they're both in this business.
Reportedly their interest rates are similar to traditional banks, but approval might be faster because blockchain technology can quickly verify your assets.
What impact does this have on ordinary people?
If you have cryptocurrency and you really believe it will rise long-term, this might be a good option. But the prerequisite is that you can handle the volatility risk and have enough money as a buffer.
If you don't have cryptocurrency, this probably won't affect you in the short term. But long-term, this might bring more capital to the real estate market, and housing prices might be affected as a result.
My perspective
I think this trend is very interesting - it reflects a bigger change: we're witnessing a reshuffling of the financial world. Previously only banks could lend you money to buy houses, now all kinds of new financial models are emerging.
But any innovation comes with risks. My advice is, if you're interested in this, make sure you fully understand the risks first. Don't try it blindly just because it sounds cool.
Finally, I want to say that whether it's Bitcoin or traditional currency, the essence of finance is stil
