Comparison
Removing one mechanism is not removing risk
A fiat loan denominates debt in dollars against bitcoin collateral. This arrangement denominates both sides in bitcoin. The difference is real, and so are the risks that remain.
Two different debts
| Dimension | BTC-denominated repurchase | Illustrative fiat-denominated BTC loan |
|---|---|---|
| Amount owed | BTC | Fiat currency |
| Effect of a falling BTC price on the debt | The BTC obligation remains fixed under the agreed terms | The fiat debt remains fixed; the collateral value declines |
| Price-driven LTV margin calls | Not the conventional fiat LTV mechanism | May occur, depending on the provider's terms |
| Principal repayment | Requires BTC | Requires fiat currency |
| Main unresolved risks | BTC repayment capacity, provider performance, contract enforcement | Price-driven collateral shortfall, provider performance, contract enforcement |
In the BTC-denominated arrangement a falling dollar price does not mechanically increase the bitcoin owed or trigger the conventional fiat LTV mechanism. That is a structural difference, not the elimination of borrowing risk.
What a fall does to each debt
Illustrative terms only, stated so you can check the arithmetic: 1 BTC of collateral at USD 100,000, USD 50,000 borrowed (50% initial LTV), liquidation threshold at 80% LTV, before accrued fees or interest. These are not any named provider's current terms, and no provider-specific outcome is claimed.
| Scenario | BTC price | Fiat loan LTV on those terms | BTC repurchase obligation |
|---|---|---|---|
| No fall | USD 100,000 | 50% | Unchanged in BTC under the agreed terms |
| 40% fall | USD 60,000 | 83%, beyond the stated 80% threshold | Unchanged in BTC under the agreed terms |
| 70% fall | USD 30,000 | 167%, beyond the stated 80% threshold | Unchanged in BTC under the agreed terms |
Under a fiat loan on those illustrative terms, a 40% fall pushes LTV past the threshold and the lender can act under its contract. Under the BTC-denominated arrangement the obligation does not move with the price. What moves is the value of whatever you did with the proceeds, measured against the bitcoin you still owe.
Risks that remain
- Your proceeds underperform bitcoin. This is the largest risk: you owe bitcoin at repurchase whatever you bought.
- The provider does not perform, or the contract is enforced against you. Collateral recovery follows the signed agreement, not a promise on this page.
- You no longer hold the bitcoin required at repurchase because it was spent, sold, or invested, and buying it back costs more than expected.
- Tax consequences, which depend on you and your jurisdiction and are not settled by anything on this site.
Not for borrowing to hold more bitcoin
If the borrowed bitcoin would be spent on something that cannot produce the bitcoin owed at repurchase, the fee is the least of the problem. The obligation is in bitcoin.