So then, to get back the bitcoin in 12 years when it’s worth a billion dollars or whatever, you just have to make back the million USD you spent (plus interest), convert to USDC, and pay back (with interest)?
And then the risk you run is that bitcoin falls between now and that time, at which point your collateral would be liquidated to the highest bidder, and you’d be left with a Tesla but no bitcoin. (Not such a bad risk, all things considered.)
It would be even easier than that. Suppose for the sake of simplicity you put your whole million dollars of Bitcoin into Compound. You could then withdraw USD up to the point where you hit the collateralization ratio set by Compound, e.g. if the collateralization ratio is 150%, you could withdraw $666k of USD.
When Bitcoin goes up 1000x, your collateral is now worth a billion dollars, but you have still only borrowed $666k (plus interest). You have way more collateral than you need. So you could just withdraw 99.9% (minus interest) of the collateral, if you wanted. You don’t even have to repay anything to do that.
Right, ok!
So then, to get back the bitcoin in 12 years when it’s worth a billion dollars or whatever, you just have to make back the million USD you spent (plus interest), convert to USDC, and pay back (with interest)?
And then the risk you run is that bitcoin falls between now and that time, at which point your collateral would be liquidated to the highest bidder, and you’d be left with a Tesla but no bitcoin. (Not such a bad risk, all things considered.)
That’s pretty awesome.
It would be even easier than that. Suppose for the sake of simplicity you put your whole million dollars of Bitcoin into Compound. You could then withdraw USD up to the point where you hit the collateralization ratio set by Compound, e.g. if the collateralization ratio is 150%, you could withdraw $666k of USD.
When Bitcoin goes up 1000x, your collateral is now worth a billion dollars, but you have still only borrowed $666k (plus interest). You have way more collateral than you need. So you could just withdraw 99.9% (minus interest) of the collateral, if you wanted. You don’t even have to repay anything to do that.