- Peter Schiff criticized crypto-backed mortgages, arguing they increase costs and risk by effectively forcing borrowers to take on two loans and finance 100% of a home’s value.
- The new product, backed by Fannie Mae and offered via Coinbase and Better, allows borrowers to use BTC or USDC as collateral, while supporters say it preserves crypto exposure and avoids capital gains taxes.
- Retail sentiment around Coinbase turned to ‘neutral’ zone on Stocktwits, with ‘high’ chatter levels, reflecting mixed reactions as the debate over crypto-backed mortgages intensifies.
Peter Schiff, an economist and Bitcoin critic (BTC), has spoken out against the new idea of crypto-backed mortgages, saying that it could make mortgages more expensive and risky for buyers.
Schiff wrote several times on X that people who use Bitcoin or stablecoins like USDC as collateral are really taking on two loans: a regular mortgage and a separate crypto-backed loan. He says this structure means buyers are "financing 100% of the cost of the home" rather than making a typical down payment.
Schiff also questioned the product's logic, asking why borrowers would put USDC up as collateral when they could just sell it and make a down payment with no interest. He also said that taking out a crypto-backed loan on top of a mortgage increases the likelihood of default, since the borrower has to pay both debts at the same time.
His criticism follows Fannie Mae's (FNMA) approval of its first cryptocurrency-collateralized loans on March 26. Fannie Mae backs approximately $4.3 trillion in mortgages. By pledging cryptocurrencies like Bitcoin (BTC) or stablecoins like USDC, borrowers can obtain a separate down payment loan through the product, which was introduced by Better Home & Finance (BETR) in collaboration with Coinbase (COIN).
These loans have fixed terms and no margin calls as long as borrowers make their payments on time. They are usually overcollateralized, with ratios of about 250% for Bitcoin and 125% for USDC.
Users Support Crypto-Backed Mortgage Loans
Supporters say the model lets borrowers keep their exposure to assets like Bitcoin while getting cash, so they don't have to sell and pay capital gains taxes. Some supporters also believe that crypto-backed loans are faster and more flexible than traditional loans, a product that has a useful link between digital assets and real-world financing. However, critics like Schiff contend that the added leverage and complexity may outweigh the benefits, particularly in volatile market conditions.
How Stocktwits Users Are Reacting?
Coinbase stock was trading down by 0.2% in after hours trading. On Stocktwits, retail sentiment regarding COIN improved to ‘neutral’ from the ‘bearish’ zone, while chatter remained at ‘high’ levels over the past day.
However, significant bearish positioning in the options market was noted by some users, who highlighted $161 as a crucial support and pointed to significant put activity around the $47.78 million level, indicating downside risk if that level breaks.
Others, on the other hand, continued to be optimistic, pointing to recent events and stating their belief that Coinbase and the larger cryptocurrency market could experience significant growth. Some even predicted that prices would soon double.
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