Over the past couple of years, I've noticed that many folks are using $BTC as collateral to borrow money, and often the real pressure isn't necessarily from the coin price. A lot of the time, it's actually the interest rates.
When BTC drops, most people can accept it since those in crypto are mentally prepared for volatility.
But borrow costs can be totally unreasonable. One day the rates seem manageable, and then you wake up to find the utilization shot up, and suddenly the rates have changed drastically. Positions haven’t really moved, but the pressure on funds starts to morph.
Many have gone through moments like these. The market doesn’t collapse, yet you hesitate to make a move.
So when I saw @TermMaxFi releasing the cbBTC / WBTC fixed borrow rates on Base, my focus wasn't really on the 2.30%-2.50% itself. What I was really paying attention to was that statement: rate doesn’t move.
According to the official data, the rate for May 31 is around 2.30%, for June 30 it’s about 2.50%, and the market for July 31 is also set to launch. Whether those numbers are low or not, people will compare. But those who have experienced floating rates know that often what we really want isn’t the lowest interest but rather stability.
It’s about not suddenly receiving a new price list in the middle of the night.
Especially with BTC as collateral, which is already volatile enough. If the borrowing costs are also fluctuating based on others' leverage or the pool utilization, your position starts to feel more like an emotional game. You can borrow today, but next week you might hesitate to do so; that feeling is particularly draining.
#TermMax The interesting part of this structure lies right here. The cbBTC / WBTC market is isolated, so changes in demand for other collateral won’t directly yank your borrow rate along with it. And lenders have already priced in the volatility risk when quoting.
Of course, the risk hasn’t disappeared. BTC volatility, liquidation pressure, liquidity issues—those still exist. But at least you won’t have to wait for the market to get crowded before recalculating your funding costs.
With BTC collateral, I think the impact will be especially noticeable. Because previously, many borrowers were juggling two types of volatility: one from BTC and the other from borrowing costs. Now at least part of that has been locked in advance.
Of course, we can’t jump to conclusions about whether it will definitely be cheaper in the long run.
When BTC drops, most people can accept it since those in crypto are mentally prepared for volatility.
But borrow costs can be totally unreasonable. One day the rates seem manageable, and then you wake up to find the utilization shot up, and suddenly the rates have changed drastically. Positions haven’t really moved, but the pressure on funds starts to morph.
Many have gone through moments like these. The market doesn’t collapse, yet you hesitate to make a move.
So when I saw @TermMaxFi releasing the cbBTC / WBTC fixed borrow rates on Base, my focus wasn't really on the 2.30%-2.50% itself. What I was really paying attention to was that statement: rate doesn’t move.
According to the official data, the rate for May 31 is around 2.30%, for June 30 it’s about 2.50%, and the market for July 31 is also set to launch. Whether those numbers are low or not, people will compare. But those who have experienced floating rates know that often what we really want isn’t the lowest interest but rather stability.
It’s about not suddenly receiving a new price list in the middle of the night.
Especially with BTC as collateral, which is already volatile enough. If the borrowing costs are also fluctuating based on others' leverage or the pool utilization, your position starts to feel more like an emotional game. You can borrow today, but next week you might hesitate to do so; that feeling is particularly draining.
#TermMax The interesting part of this structure lies right here. The cbBTC / WBTC market is isolated, so changes in demand for other collateral won’t directly yank your borrow rate along with it. And lenders have already priced in the volatility risk when quoting.
Of course, the risk hasn’t disappeared. BTC volatility, liquidation pressure, liquidity issues—those still exist. But at least you won’t have to wait for the market to get crowded before recalculating your funding costs.
With BTC collateral, I think the impact will be especially noticeable. Because previously, many borrowers were juggling two types of volatility: one from BTC and the other from borrowing costs. Now at least part of that has been locked in advance.
Of course, we can’t jump to conclusions about whether it will definitely be cheaper in the long run.