Blog : crypto

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Here’s Why Crypto Mortgages Are The Next Big Disruptor

Crypto mortgages are bringing in a new wave of onlookers, wondering if this is the next avenue to securing a home? Well it makes sense, but we’ll see if there’s a catch to it. Say you’ve got $300,000 in crypto currency, this can be leveraged against a mortgage company’s $300,000 cash for a home with no taxes paid because you never cashed out of crypto!

Why crypto mortgages do make sense

When you cash out of crypto you pay huge amounts of taxes, short-term investments get hit harder than long-term investments. The trick here is that the bank will hold your crypto equity as collateral, so it’s like you never cashed out and those taxes are out of the equation of your new home. This is especially helpful for those who are self-employed or a regular trader since qualifying isn’t easy traditionally.

The end all is crypto mortgages allow you to pay off your house without meandering through the traditional process, with large dollar signs sitting in your crypto wallets it makes perfect sense to skip all of that lousy traditional process!

Why crypto mortgages are insane 

Okay really, what’s the risk?

Okay, so the thing is, like everything in the crypto world, crypto mortgages are an amazing idea that can go south for you very quickly.

Let’s say that your $300,000 in crypto tanks and now it’s worth $100,000. Your bank will perform a mortgage call and you’ll either need to put up more equity, refinance your home, or otherwise come up and with the cash. 

And let’s be honest, crypto is very volatile. So, the odds are that this could happen.

It’s a gamble. If everything works perfectly, you disrupt the mortgage industry and get an amazing house without paying taxes. If everything goes poorly, you’ll be back on your Robinhood app trading penny stocks in no time at all.

As you should know, the crypto world is very volatile and can make your life either Heaven or Hell depending on the market. How you could end up losing out on big dollars is, say that $300,000 in your wallet tanks down to $100,000 your bank will either require you to refinance your home, put more equity, or otherwise come up with the cash. The odds of this happening are probable as the market fluctuates consistently, so the gamble is up to you. The pros are getting to disrupt the mortgage industry by securing an amazing home without paying taxes, versus the cons of a major setback in your crypto wallet and the bank leveraging you (they know you’re likely to pay considerable fee and high interest to avoid hefty taxes).

What crypto mortgages mean for tech disrupters 

The larger picture is mortgage is a highly regulated and controlled industry. You’re not going to be getting FNMA mortgages, however the fact that you can get a subprime mortgage with crypto makes crypto continue to take over the conventional mainstream spheres.

So, what industry will be next? Travel and hospitality? Restaurants? Manufacturing? As cryptocurrency continues to tumbleweed in support and reach, it can also spread into any of these other sectors and more. Just as Blockchain technology is changing everything from the Metaverse to legal contracts, crypto can be slotted into any type of equity or asset-based transaction. 

Years ago, crypto fans on Reddit rejoiced when they could suddenly order a pizza through BTC. Being able to buy cars, houses, or even just groceries with crypto doesn’t put crypto closer to adoption, it opens new opportunities more widespread than the eye can meet. It’s not just about building some crypto mobile app anymore. Now it’s about what traditional industry you want to disrupt.

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Crypto Mortgages May Be the Next Big Disruptor

Alright, well—it almost makes sense. Crypto mortgages are the new fad. You’ve got $300,000 in crypto. The mortgage company has $300,000 in cash. You leverage your crypto for the cash then you leverage that cash for a house and you’ve got it made. No taxes paid because you never cashed out the crypto.

But surely there’s a catch?

Why crypto mortgages do make sense

When you cash out your crypto you pay huge amounts of taxes, more if it was a short-term investment than a long-term investment. Crypto mortgages make it possible to secure a bank loan with your crypto equity, so you don’t actually have to cash out. The bank will hold your crypto as collateral but otherwise you’ve never cashed out. So, you can buy a house. And if you’re self-employed or a regular trader, you probably won’t qualify any other way.

If you’ve got millions of dollars in crypto, this type of mortgage makes absolute sense. Now, you’re still paying the mortgage, which also means that once you’ve paid off your house you’ll own it free and clear. But you get a great mortgage without having to go through a traditional qualification process.

Why crypto mortgages are insane 

Okay, so the thing is, like everything in the crypto world, crypto mortgages are an amazing idea that can go south for you very quickly.

Let’s say that your $300,000 in crypto tanks and now it’s worth $100,000. Your bank will perform a mortgage call and you’ll either need to put up more equity, refinance your home, or otherwise come up and with the cash. 

And let’s be honest, crypto is very volatile. So, the odds are that this could happen.

It’s a gamble. If everything works perfectly, you disrupt the mortgage industry and get an amazing house without paying taxes. If everything goes poorly, you’ll be back on your Robinhood app trading penny stocks in no time at all.

For the bank, they’re basically leveraging you. They’ve hedged their risks because either way, you’ll be left holding the bag. And they know you’re likely to pay considerable fees and high interest to avoid those hefty taxes.

What crypto mortgages mean for tech disrupters 

Big picture time. Mortgage is a highly regulated and very controlled industry. Obviously, these aren’t going to be FNMA mortgages. But the very fact that you can even get a subprime mortgage with crypto means that crypto continues to bleed into conventional, mainstream spheres.

So, what industry will be next? Travel and hospitality? Restaurants? Manufacturing? As cryptocurrency continues to grow in adoption, it can also spread into other sectors. And just as Blockchain technology is changing everything from the Metaverse to legal contracts, crypto can be slotted into any type of equity or asset-based transaction. 

Years ago, crypto fans on Reddit rejoiced when they could suddenly order a pizza through BTC. Being able to buy cars, houses, or even just groceries with crypto doesn’t just put crypto closer to adoption. It opens new opportunities. It’s not just about building some crypto mobile app anymore. Instead, it’s about what traditional industry you want to disrupt.

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Celsius Froze Crypto Withdrawals: Here’s What It Means for Crypto

Are we tired of this yet? The crypto market has never been as disrupted as it has been by its own community. Celsius (another big bad crypto marketplace) froze crypto withdrawals because, frankly, it was insolvent. Voyager this week just filed for Bankruptcy. Now Coinbase is selling off all its information to ICE—a government organization—because it’s about to declare bankruptcy.

What does this all mean for crypto?

It’s Not a Pipe Dream, But It Could Have Been Too Early

You know, there was a company that tried to bring television to the internet. It was going to disrupt cable. But it did it too early. (This is famously a Mark Cuban fail, but really he was right, ultimately.) They tried to bring television to the internet before the internet had the bandwidth to support it. So, they crashed and burned.

We have Bitcoin, and it’s a great idea: a global decentralized currency. But if you were an early adopter like me, you remember that within a year of mainstream attention, the Blockchain was so large that no one could feasibly download it anymore. And then people keep losing thousands upon thousands of Bitcoin, worth thousands upon thousands of dollars.

So they start moving to marketplaces and exchanges. And the second they did that, it’s no longer decentralized. Now it’s in control of a few companies because the most popular companies are the ones that have the market share. And here we are.

The Perils of Deregulation

Deregulation is great when you aren’t getting taxed and no one can trace your money. The flip side to that is the scammers who stole your money also can’t be traced and aren’t getting taxed. Now, once crypto hit the Robinhood App and even Cash App, better controls started to be instituted.

But crypto marketplaces still aren’t banks. They aren’t controlled or regulated by anyone. And yes, they can just disappear with your money.

As Coinbase pointed out earlier in the year, the money in their coffers isn’t even technically yours. Their bankruptcy could have led to the dissolution of all the money held in their wallets.

So, we’ve got marketplaces that are in charge of your money and poised to disrupt crypto, and they can basically do whatever they want. They can take away that “buy/sell” button (like the Robinhood app did) at any time because they aren’t regulated. They aren’t a financial institution.

Now, that doesn’t actually mean they can commit fraud. They can’t promise to keep your money and then throw it away. But if you look at your Terms of Service, you will probably discover that they have a lot more rights to your crypto than you do.

Going Back to the Foundations

Of course, that doesn’t mean that crypto was a terrible idea, or that it can’t still disrupt global currency. Primarily, the issue is that early crypto technology has always been so unwieldy that there’s really no way to interface it except through a third party. These third parties strip away a lot of the benefits and protections related to crypto in exchange for ease of use.

So, to really disrupt the crypto market, we need to start using crypto more intelligently. Yes, crypto was made for engineers. But for actual adoption to really surface, it has to be usable by people who don’t have a computer science degree. You know, something like an easy-to-use mobile app.

As for now, here’s what you need to know about the crypto market: It’s bad. That’s not to say you shouldn’t fill your pockets with cheap coin, but the problem is that crypto is essentially a faith-based economy, and people are getting crushed. Now that people can’t really trust their marketplaces to actually give them their money, they are turning away from crypto en masse. That doesn’t mean you should listen to the panic on Reddit… but you should probably be a little more cautious with your yolos.