BTC Wealth Report – Issue 09

👋 Welcome to BTC Wealth — Issue 09

Bitcoin-backed loans are back — and so is the drama.

Strike just launched a new product: deposit bitcoin, borrow dollars.

Simple enough — but it immediately set off alarms around the one word no Bitcoiner wants to hear: rehypothecation.

Jack Mallers swears it’s not happening.

Okay — but here’s the deeper issue:

Is “proof of reserves” enough if you don’t know who else has a claim on your bitcoin?

We’re unpacking the structure, the risks, and what still doesn’t sit right.

Here’s what we’re tracking this week:

💼 Bitcoin-Backed Loans — Strike’s new offering revives a touchy topic
🚩 Trust, Terms & Transparency — Why "segregated wallets" aren't the full story
📉 Flows Report — Bitcoin priced chopped sideways, and so did the ETFs

Let’s get into it.

🔒 Bitcoin-Backed Loans Are Back — But Can You Really Trust Them?

Last month, Strike launched a new bitcoin-backed loan product:

Quick breakdown of the details:

📊 Loan sizes: Up to $2M for individuals, $1B for institutions
💰 Rates: 9–13% APR
📆 Terms: Up to 12 months
🔍 Proof-of-reserves: Promised

💸 Attractive Terms? Meh

A 9–13% APR is steep.

But for most high-conviction Bitcoiners, that’s not necessarily the dealbreaker.

Since you’re reading this newsletter, you probably agree:
Bitcoin’s future returns will dwarf that hurdle.

So borrowing at these rates can make sense — if you believe BTC’s going higher.

But that’s not the only risk that matters.

The big issue is the credit risk you take the moment you deposit your BTC on a platform like Strike.

If you were around in 2022, you’ll remember these type of products have blown up before.

🚫 Strike Isn’t Rehypothecating Your Bitcoin… Right?

The 2022 collapses happened because lenders reused your bitcoin collateral behind the scenes — piling leverage on leverage until it all snapped.

Strike CEO Jack Mallers has gone on record:

Good to hear - but for some reason in this world, it’s never quite so simple.

Up until last week, Strike’s terms of service explicitly said it could rehypothecate the bitcoin. 

AWKWARD 😬
Mallers blamed “legal nuance” and updated the terms.
Now the language is cleaner — but the fine print still allows Strike to “pledge” your bitcoin.

And that’s where things get murky.

🔁 It’s Not Rehypothecation — It’s Securitization.

Strike may not lend your BTC directly.
But it looks like they’re pledging the loan contracts to borrow more money.

Here’s what appears to be what’s going on here:

1️⃣ You borrow against BTC → Strike holds your IOU
2️⃣ Strike bundles those IOUs into a loan portfolio
3️⃣ They pledge that portfolio to institutional lenders
4️⃣ They get cash → issue more loans → rinse and repeat

✅ Your bitcoin sits in a segregated wallet
❌ But the loan paper is getting pledged and leveraged downstream

So yes — your BTC isn’t moving anywhere.
But you’ve entered a chain of liabilities — and you don’t know where it ends.

📛 Proof-of-Reserves Is Overrated

Proof-of-reserves is great PR.

But the Strike example demonstrates — it’s only half the equation.

Your bitcoin might not be moving — but who else has a claim on it?

If Strike pledges your loan downstream — and that lender pledges that bundle again?

You’ve got leverage on top of leverage.

Who really owns the Bitcoin?

🟠 Bitcoin-backed loans should be a killer product:

In theory the idea behind Bitcoin Backed loans is compelling:

✅ Access liquidity
✅ Avoid selling
✅ No capital gains

But the risks are real:

⚠️ Price downside and liquidation
⚠️ Sleep-at-night factor
⚠️ Opaque counterparty exposure

Eventually this will be a breakout product category — but only if platforms get serious about transparency and user protections.

Jack says proof-of-reserves is coming.
But without transparent liabilities, it’s not enough.

📊 Flows Report: A choppy week

Bitcoin moved sideways this week — and ETF flows told the same story.

U.S. spot ETFs sold a net 1,821 BTC.

🔢 Here’s the breakdown:

• 🟢 BlackRock (IBIT): +616 BTC

• 🔴 Fidelity (FBTC): –1,377 BTC

• 🔴 ARK (ARKB): –279 BTC

• 🔴 Grayscale (GBTC): –393 BTC

It’s not catastrophic — but after May’s massive 50,000+ BTC inflow, this week felt like a cooldown.

🧠 What’s the takeaway?

Flows remain tightly coupled to price — especially for non-IBIT ETFs.
BlackRock keeps bidding. Everyone else moves with the market.

For now the ETF buyers are on pause.
No doubt they’ll chase when price starts to move again.

That’s your BTC Wealth Report this week.

Found it valuable? Share it with your network. It helps more than you think.

Thanks for reading.

- Thomas Fahrer