Save in Bitcoin, Spend in Dollars: Is This The Way Before Hyperbitcoinization?

Lava has developed a self-custodial Bitcoin borrowing platform. Unlike accepted crypto indebtedness services that instrumentality custody of users’ assets (and sometimes prosecute successful risky practices similar rehypothecation), Lava is self-custodial and leverages autochthonal bitcoin astute contracts (DLCs) to alteration a much unafraid borrowing experience. The platform’s superior merchandise is the Lava Vault, disposable connected mobile and desktop, which serves arsenic a secure, self-custodial wallet and borrowing interface. It uses precocious information features, specified arsenic device-based unafraid chips for backstage cardinal absorption and biometric/two-factor authentication, to guarantee idiosyncratic funds stay safe. Lava besides offers encrypted backups to mitigate the hazard of money nonaccomplishment from a azygous constituent of failure. 

Lava’s Loans merchandise besides enables users to get dollars against their Bitcoin holdings, providing liquidity without requiring them to merchantability their Bitcoin. This is peculiarly appealing to Bitcoin HODLers who privation to support semipermanent vulnerability to BTC’s imaginable appreciation portion accessing currency for contiguous needs. Lava’s unsocial Discreet Log Contract (DLC) exertion enables it to supply these loans connected a self-custody basis, reducing counterparty and rehypothecation risk.

Stablecoin Integration – LavaUSD

Lava has launched its ain stablecoin offering – LavaUSD – to harvester Bitcoin with dollar-based spending. LavaUSD is redeemable 1:1 for the US dollar via reserves invested successful currency and highly liquid instruments. The reserve portfolio contains a premix of short-dated US Treasuries, overnight US Treasury repurchase agreements, and wealth marketplace funds each custodied with partners specified arsenic BlackRock and Fidelity. LavaUSD enables users to marque payments anyplace successful the satellite frictionlessly.

Here’s wherefore they launched it:

• Instant and Global: LavaUSD extends the stableness of the US dollar to a planetary idiosyncratic basal portion maintaining the trustlessness and information of modern cryptography. All transactions are instantaneous and settee 24/7/365, with enactment for instant connected and off-ramps to fiat currencies astir the world.   
• Lower Cost: arsenic programmable integer dollars, transactions are overmuch cheaper and much businesslike to process thereby avoiding unnecessary fees and friction successful the fiat banking system.  
• Rewards: LavaUSD makes it easier to administer yield, points, and different exclusive benefits to users. 
• Security: Lava is capable to supply larger institutions elaborate reports attesting to the backing of LavaUSD connected request whereas “it was highly hard to get successful interaction with the enactment teams of different ample stablecoin issuers” says the team. Lava’s stablecoin reserves are held successful segregated, bankruptcy-remote accounts with regulated fiscal institutions. This ensures that the reserves are afloat protected and kept abstracted from the operating funds of Lava the company, the issuer, oregon its custodians. Even successful the improbable lawsuit of bankruptcy, these reserves stay accessible and are safeguarded to guarantee afloat backing of each issued stablecoins.
• Cross-Chain Swaps: The level supports stablecoins connected different networks (not conscionable Bitcoin), utilizing atomic swaps to guarantee borrowers person stablecoins portion lenders unafraid Bitcoin collateral. Over time, Lava plans to grow enactment for aggregate networks, perchance including Bitcoin-based stablecoin alternatives arsenic they mature.

The squad has attracted important investment. Since inception Lava has raised $30 cardinal from investors including Khosla Ventures, Founders Fund, and Susquehanna International Group with angel information from institutions including the Qatar Investment Authority, Google, and Franklin Templeton among others.. In December 2024, it raised $10 cardinal successful a Series A circular co-led by Khosla Ventures and Founders Fund, with notable investors similar Keith Rabois and Peter Thiel involved. More recently, Lava raised a Series A for an further $30 cardinal financing circular with investors similar Qatar Investment Authority and Bijan Tehrani. FULL DISCLOSURE: UTXO participated successful Lava’s effect round. 

The Case for Spending BTC vs. Spending Dollars

Last week, this tweet by Caitlin Long and amplified by our favourite Bitcoiner successful Congress Cynthia Lummis received important pushback from immoderate bitcoiners, offended astatine the thought of perpetuating the fiat strategy alternatively of transaction straight with Bitcoin, arsenic it was intended by Satoshi. 

(Special S/O to our Bitcoin Magazine OG Mike Germano and PubKey extraordinaire Thomas Pacchia for truthful graciously holding beers – vino is better!) 

Spending BTC straight with merchants oregon individuals is often hailed arsenic a measurement toward Hyperbitcoinization—the hypothetical script wherever BTC becomes the ascendant planetary currency. This attack strengthens Bitcoin’s web effect, encourages adoption, and aligns with its peer-to-peer philosophy, bypassing intermediaries similar banks. However, this strategy faces important hurdles. Firstly, BTC’s terms appreciation imaginable remains substantial. Historical information shows BTC’s worth has surged from negligible levels successful 2009 to implicit $100,000 by aboriginal 2025, driven by finite proviso (capped astatine 21 cardinal coins) and increasing organization involvement (e.g., MicroStrategy’s treasury strategy). Spending BTC present risks forgoing aboriginal gains, particularly arsenic halvings and marketplace dynamics proceed to constrain proviso against rising demand.

Secondly, taxation conditions successful galore jurisdictions, including the United States, enforce restrictive burdens connected spending BTC. In the U.S., the IRS treats BTC arsenic property, meaning each transaction triggers a taxable event. Selling oregon spending BTC astatine a nett incurs superior gains tax—up to 37% for short-term gains oregon 20% for semipermanent holdings—based connected the quality betwixt acquisition terms and merchantability value. This complexity discourages nonstop spending, arsenic users indispensable way outgo basis, study gains, and navigate administrative overhead, often outweighing the convenience of BTC payments. For instance, a $1,000 BTC acquisition spent astatine $10,000 would trigger a $2,800 taxation liability (assuming a 28% effectual rate), making dollar-based spending via stablecoins a much tax-efficient alternative.

Why Holding BTC Outweighs Spending Now

Given BTC’s upward trajectory, spending it present whitethorn undermine semipermanent wealthiness preservation. Analysts suggest BTC could scope $200,000 oregon much by 2030 if existent trends persist, driven by ostentation hedging and a weakening fiat system. Spending BTC astatine existent prices locks successful worth astatine a fraction of its potential, particularly erstwhile alternatives similar Lava’s lending exemplary supply liquidity without forfeiture. Moreover, the taxation load amplifies this disincentive, arsenic predominant transactions erode nett returns. This aligns with the “HODL” philosophy, wherever retaining BTC maximizes appreciation portion utilizing borrowed dollars oregon stablecoins meets contiguous needs.

Mitigation Strategy: Buy-Back Mechanism

To equilibrium the tendency to walk with BTC retention, a buy-back strategy offers a pragmatic solution. After borrowing dollars against BTC via Lava’s platform, users tin walk these funds portion committing to repurchase BTC astatine a aboriginal day erstwhile marketplace conditions oregon idiosyncratic finances allow. This attack leverages Lava’s self-custodial lending (with its 7.5% involvement cost) to entree liquidity without selling, preserving the archetypal BTC stash. The buy-back tin beryllium timed to capitalize connected marketplace dips oregon post-tax play liquidity, perchance astatine little prices, enhancing wide holdings. For example, borrowing $10,000 against 0.1 BTC (valued astatine $100,000) allows spending, with a buy-back of 0.09 BTC astatine $90,000 later, netting a summation if BTC appreciates further. This strategy mitigates taxation vulnerability by deferring income and aligns with semipermanent appreciation goals.

As Hyperbitcoinization looms connected the horizon, the hostility betwixt redeeming successful Bitcoin and spending successful dollars reflects a pivotal infinitesimal for BTC’s evolution. Holding BTC maximizes its scarcity-driven potential—fueled by finite proviso and increasing adoption—while taxation complexities and volatility discourage nonstop spending. Stablecoins and lending models connection a applicable workaround, preserving Bitcoin’s semipermanent worth portion gathering contiguous needs. Until BTC afloat transcends fiat, this duality—hoarding a revolutionary plus portion leaning connected accepted currency—may specify the way to a Bitcoin-dominated future, and this aboriginal is being physique by Bitcoin companies!

Guillaume’s articles successful peculiar whitethorn sermon topics oregon companies that are portion of his firm’s concern portfolio (UTXO Management). The views expressed are solely his ain and bash not correspond the opinions of his leader oregon its affiliates. He’s receiving nary fiscal compensation for these Takes. Readers should not see this contented arsenic fiscal proposal oregon an endorsement of immoderate peculiar institution oregon investment. Always bash your ain probe earlier making fiscal decisions.