If Bitcoin Becomes The Worlds Pristine Collateral
Hey Jessinvestors
I think it's safe to say that investing has become a complex topic, I feel like it's become a full-time job, you need to do so much research and pick out the right stocks at the right time, or get into bonds before others see it or look at international markets and who wants to do all that work?
As someone who still trades their time and labour for money I don't have the strength for in-depth analysis and the little that I do commit is not enough to be able to make the most of the markets we have, you need large sums of capital, inside information and to be constantly vigilant to really give it a go.
Savers are suffering
The days of being rewarded for your prudence is long gone, there was a time when you could save your money in a bank and get a positive return. There was a time where you could buy government or corporate bonds and hold them to maturity, take your return and reinvest it.
Believe it or not, but the world used to run on savings, I know that's no longer the case and hasn't been the case for many years, but it is and was true.
Now that we have artificially low-interest rates and every one up to their ears in debt, investors need to go further out the risk curve to get a return which seems unfair to savers.
Not only do you not get rewarded for saving you now have to put that savings into riskier and riskier assets to get a return, so what does that tell savers? That you're better off spending it and taking out debt to finance your life.
Bitcoin as the new bond
Bitcoin looks to change the game, its rather boring if you think about it but what another financial asset encourages you to buy and hold it for as long as possible, apart from precious metals and dividend-paying stocks, very few assets I would say, its all about buying and flipping to a greater fool these days and not about value.
I've spoken before about the collateral potential of Bitcoin, and now that DE-FI is in full swing it's really got me thinking that Bitcoin could have the potential to become the new bond, should it be seen as a reserve asset.
If we look at the rate of return on some of the developed nations Bonds, you can see it has been on a downward trend for the last few decades without exception. I've pulled the most popular bonds such as the US, German Bund, Canada, Australia and the UK.
US Bond Yield - 10 Year
German Bond Yield - 10 Year
Canadian Bond Yield - 10 Year
Australian Bond Yield - 10 Year
UK Bond Yield - 10 Year
source: - tradingeconomics.com
The germans are already into negative returns while the rest are all well below 1%. Who in their right mind is buying something that yields 1% and pays out in something that doesn't hold its value, fiat currency, it makes zero sense.
This is how far we've fallen.
The crazy part is there was a time when bonds would net you a healthy 10 - 14% return over the "10 year" and you as an investor didn't have to do much or think about much.
People buy bonds because it's seen as a promise, you give them capital and the issuer promises to pay you interest on the money you have invested, along with the return of your investment at some future date.
Governments, corporations, municipalities and other issuers sell bonds to raise money for various capital purposes, such as road building or plant expansion. Advantages for investors range from income and portfolio diversification to capital appreciation and inflation protection.
As the need for better collateral is evidently needed, we can see a shift to the equity-based debt over issuing of new debt.
DE-FI Bond market
As Bitcoin continues to rise in price, it's going to create many wealthy individuals who will be sitting with large amounts of capital to invest. Governments and corporate would want to tap into that capital, and I don't think it's crazy to think that we could have bonds issued on the blockchain in a non-custodial service.
Imagine if you will, a Uniswap, but with corporate and government bonds, you can lock in your capital and purchase a bond for a rate of return you are happy with. The institution uses the capital to fund their goals while paying you back a fee.
Bonds are often seen as the risk-free rate of capital, and with Bitcoin, normally over collateralized for loans, it reduces the risk even further for both parties.
I can see it happening that one day when Bitcoin's lost a lot of its volatility, and we figure out the cost of capital with a yield curve with the help fo DE-FI that a Bitcoin bond could net you a return of say 5%. %5 is just a thumb suck since I've seen between 4 - 6% ROI on Bitcoin savings accounts with CE-FI apps, so let's say that were the case with Bonds too.
We can't say what it could be since the products don't exist and the market is not established for it, I imagine if Bitcoin is well within the 10's of Trillions getting people to commit it to projects would be a full-time job for many looking to raise capital.
As a HODL'r, Wouldn't that be lovely?
You could then safely lend out your Bitcoin, get a return on investment and sit back and allow your BTC to work for you.
Have your say
What do you good people of HIVE think?
So have at it my Jessies! If you don't have something to comment, comment "I am a Jessie."
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