Most borrowers focus on the interest rate, but that’s only part of the equation. Rates can vary widely depending on the platform and structure, and your bitcoin is encumbered while pledged as collateral. There can also be less visible risks, including rehypothecation, platform risk, and liquidity constraints. The biggest cost, however, is not explicit, it’s the potential for being forced into decisions under pressure.
This becomes most clear with margin calls. If bitcoin declines and your LTV breaches a certain threshold, you may be required to add more collateral or pay down the loan. If you’re unable to do so quickly, liquidation can occur automatically. This locks in losses and reduces your bitcoin position at exactly the wrong time. This dynamic introduces timing risk into what is otherwise a long-term asset.
In most cases, we don’t view borrowing against bitcoin as a core strategy. However, if someone were to consider it, timing matters. Historically, more favorable setups tend to occur when bitcoin is already 40% or more below its all-time highs, sentiment is weak, and excess leverage has been cleared from the system. In these environments, the risk of forced selling is generally lower than during euphoric market conditions, when borrowing activity tends to increase.
Borrowing against bitcoin can be useful in specific situations, but it adds a layer of fragility that many investors do not need. In many cases, simply holding unencumbered bitcoin with a long-term perspective is the more durable approach, avoiding the risk of being forced to act at the worst possible time.
For clients who do explore this strategy, our role at DAiM is to approach it conservatively and with a clear risk framework. That includes closely monitoring loan-to-value ratios, maintaining more conservative thresholds than what platforms typically allow, and planning for adverse scenarios before they occur. The objective is not to maximize borrowing capacity, but to protect bitcoin holdings and reduce the likelihood of forced liquidation during periods of volatility.
For investors seeking asymmetric return potential in crypto, the case for simplicity is becoming clearer. Rather than chasing opaque, fee-heavy structures with uncertain outcomes, a liquid portfolio, anchored by bitcoin, offers a more efficient and controllable way to participate in the asset class. At DAiM, we work with clients as a Registered Investment Advisor focused on digital assets, helping them build and manage portfolios centered around bitcoin with a long-term perspective. Through comprehensive wealth management, institutional-grade custody partners, and disciplined portfolio construction, we aim to reduce unnecessary complexity and risk, prioritizing liquidity, transparency, and capital preservation while positioning clients to participate in bitcoin’s long-term upside.
The broader takeaway is that while always-on trading is now standard in crypto, scale and liquidity remain the defining factors. Many platforms can offer 24/7 access, but far fewer can sustain the depth of market needed to attract and retain meaningful capital. As the space evolves, and tokenized real world assets become popular, the winners are likely to be those that combine continuous access with concentrated liquidity, rather than simply extending trading hours without solving for participation.
At DAiM, we view these shifts as more than just market structure, they represent the early formation of a new financial system. As part of our ongoing portfolio management process, we continue to evaluate where sustainable liquidity, user adoption, and long-term value creation are converging across digital asset markets. From time to time, this leads to thoughtful adjustments within our Model Portfolio to reflect emerging areas of infrastructure that we believe are positioned to benefit from these trends. Access to these evolving opportunities, implemented with a disciplined, risk-aware approach, is a core part of how we help clients navigate the next phase of digital asset investing.
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