I mentioned before that you should invest in $IBIT every month and then do BTCFi. Many friends asked what#BTCFiis. I wrote this article a month ago. I believe that after SAB121 is passed and American banks can custody #Bitcoin, they will definitely be able to use BTC spot or spot ETF as collateral for refinancing within a certain period of time.
To put it bluntly, it is pledged lending. This has already been played out during the DeFi era in 2021. Why do I think it is more important?
Because at that time, all the assets were on-chain. Although some wBTC would be involved, it was not native BTC, and there would not be large amounts of funds involved on the chain. However, if banks enable custody and pledge lending, it means that the BTC currently purchased by high-net-worth investors and institutions can be changed from an illiquid state to a liquid state, and it will not increase the selling pressure on the market.
In the 2021 cycle, there were not a large number of institutions purchasing BTC, but this cycle is different. Large institutions have appeared in both spot BTC and ETFs, and the reuse of funds is very important. It is almost impossible to expect any non-compliant on-chain protocol to carry hundreds of billions of dollars of traditional assets.
But regulated banks can. If banks act as "nodes" to become the second-layer network of BTC and serve as the "settlement layer" for BTC (or ETF) mortgage lending, then the BTC purchased by investors can be added to the "spot leverage", and 2.5 times the spot leverage can be leveraged without having to sell BTC (or ETF).
Some people may ask, can’t we do it on-chain? Why must we do it in the bank? Because banks are more “humane”. On-chain assets need to be supplemented to avoid liquidation, but banks can use “total assets” to postpone the possibility of liquidation, which is a bit like the unified account of an exchange, but it is simpler than this. Moreover, for banks, even if the risk threshold is reached, it does not mean that there is no negotiation.
More importantly, the BTC stored in the bank is, first of all, BTC, not various cross-chain assets. Second, the BTC kept by the bank has no risk of being stolen. Once any security problem occurs, the bank must compensate, which reduces the risk on the chain and is more friendly to traditional investors. Third, the BTC pledged by the bank can be used as proof of assets, which is something that neither the chain nor the exchange can do.
So back to what I want to do, which is to hold a certain amount of IBIT, and then when BTCFi can be executed, the first step is to make a trading pair of BTC and IBIT, directly exchange BTC for IBIT and directly exchange BTC through IBIT, which is equivalent to providing a spot circulation channel for IBIT.
Why do I want to do this?
Because IBIT can only be purchased when the U.S. stock market opens, and the purchase volume is subject to depth constraints, and the current ETF logic does not support the swap between IBIT and spot BTC, and IBIT cannot be purchased directly through stablecoins. The most important thing is that the swap between BTC and IBIT requires certain compliance thresholds before it can be done. However, if it is in the form of a fund, this problem does not exist, and the fund has a way to avoid this problem to some extent.
In the second step, after the bank launches the pledge of BTCFi, the bills (debts) can be issued on-chain assets through the audit company, BTC can be RWAized, and RWA of BTC bills can be made. The bank’s BTC bills can be used as asset endorsement for RWA, and RWAFi and BTCFi can be integrated. After avoiding compliance, all the underlying assets are compliant again. BTCFi can be re-pledged or liquidity mining can be carried out to enrich the liquidity of BTC and IBIT.
All of this requires the new version of FASB, which will be passed in December this year, in addition to SAB121. So I want to start holding IBIT as a compliance framework, and then try the feasibility step by step. Of course, if it doesn't work, it's equivalent to holding IBIT, which is not a loss. I want to try this kind of business that won't lose money no matter what.
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