During this event at #BinanceCampus, I shared my #BTCFi theory with many friends. Although everyone has their own opinions on execution, there is a surprising consensus that this thing does not make money. There is no visible way to profit; at most, you can earn a service fee, handling fee, and custody fee. Even if the service reaches a billion dollars in scale, the money that can be earned is very limited. So many friends question why do such a thing.
How to say it? To be honest, maybe everyone won't believe it. If I lie, I can't find a better reason. Let's talk candidly; candid words have truths, expectations, and ideas. What I want to do is based on providing liquidity to #Bitcoin. In everyone's mind, BTC, stablecoins, and fiat currencies are the most important liquidity. These are what market makers need to provide. What is the significance of providing liquidity?
That's right. This provides depth liquidity to BTC, but what I actually want to do is another aspect. I've talked about whether BTC is a risk asset or a hedge asset. Previously, everyone thought it was a risk asset, but more and more friends are starting to consider whether BTC is a hedge asset. In 2023, we discussed this many times. The periodic conclusion should be that for small-scale investors and financial investors, #BTC is undoubtedly a risk asset, but for high-net-worth users and those who seek to realize acceptance, BTC may be a hedge asset.
What I want to do with BTCFi is aimed at hedge assets, so it does not provide deep liquidity for BTC, but provides liquidity for those who need asset inheritance, asset acceptance, and even asset compliance, as well as those who need to leverage in banks.
In simple terms, as the price of BTC rises, the number of friends who can own BTC will decrease, and when you own it, the friends who do not want to sell will increase. However, BTC is still a virtual currency. Although we can expect to achieve a price of one million dollars, in some sovereign countries, it is difficult to leverage real assets through BTC. Selling BTC to exchange for other assets always feels like you might be left behind.
Therefore, only by exchanging BTC, ETF BTC, and BTC in U.S. stocks with each other can provide liquidity to BTC itself. In other words, you will never lose your BTC. This is also my initial idea, to provide Curve-like liquidity interactions between BTC, MSTR, and IBIT, so that even if you hold virtual BTC, you can directly exchange BTC for $MSTR in U.S. stocks or $IBIT in ETFs, which allows you to not lose your BTC and lets BTC investors gain exposure to traditional assets.
What are the benefits? I've said it many times before, whether it's about KYC on funds, avoiding risks, or the things that can be done to increase spot leverage, there are many options. For example, seeking overseas identity, needing a dollar bank account, wanting to open a brokerage to invest in U.S. bonds, all require the allocation of traditional fiat assets. This can almost correspond to a lossless tracking of BTC price through a spot ETF or U.S. stocks. More importantly, when you can exchange it positively, you can also exchange it negatively. MSTR and IBIT can be exchanged back to BTC at any time, which is the most meaningful point; you will never lose your BTC.
This is my ideal. I have openly said from the beginning that my BTC will only be bought and never sold; it is reserved for squirrels. But that does not mean I am unwilling to use this asset for more opportunities. For example, I may exchange my BTC for IBIT, which almost completely avoids losing BTC positions while gaining additional capital exposure. Even without borrowing, it can be stored in the bank as my asset. If I encounter any unexpected events, I do not need to teach him how to use the exchange, how to sell BTC or store BTC, or how to convert BTC to fiat. I do not need to teach him what to do if the funds are frozen or if deceived; all he needs is a proof, and he can obtain the spot ETF. Then the bank can help him handle it. How simple is that?
Returning to the issue of profitability, generally speaking, such service fees are around 0.1% to 0.12%, which indeed does not make money. Even if some acceptance services are added, the total revenue is only around 0.15%, or even less. However, it is clear that these configuration services are labor-intensive and do not make much money. So when I chat with friends, I say this is a very meaningful thing, everyone looks at me with strange eyes. After all, the crypto circle is still about making money. Talking about feelings is fine, but really working for feelings is not very worthwhile.
This is the truth, but just like I am typing, this thing does not make money. It's all about paying for my own feelings. Of course, saying it doesn't make money at all is not true. Although the earnings are small, if the capital volume scales up, it can still be a considerable income, especially if it can really help those in need to do asset allocation in a compliant way. This is also an achievement. Moreover, as the provided liquidity increases, I can even enter into other types of U.S. stocks, and it is even possible to create my own fund pool. This is also one of my plans.
In the previous chart, I mentioned that borrowing from a bank might get you a 60% exposure, but borrowing from me can get you a 70% exposure, even with no interest, because I will provide a higher liquidation position. If liquidation occurs, I will have additional premium income, but this requires a sufficiently large fund pool, which is a market with great demand. My plan is to take 70% of the funds, then 75% liquidation position, with a 5% profit, which is not bad.
So you see, there are still opportunities. It can help those in need, and there are long-term returns and gaming profits, which is not bad.
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