What to Know Before You Borrow Against Bitcoin, Part 3: LTV and Liquidation

Before you borrow: the three questions

Most borrowers compare the headline rate and stop. These are the three things that actually decide how a Bitcoin-backed loan goes for you:

1. Custody — where your collateral sits, whether it's pooled with everyone else's, and who can move it.
2. Rates and fees — the number you were sold versus the cost you actually carry.
3. LTV and liquidation — the one number that decides whether you keep your Bitcoin.

Read them in order, or jump to the one you haven't asked about yet. This is Part 3.

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You're probably managing the wrong number

Loan term decides everything on a mortgage. On a Bitcoin-backed line, it decides almost nothing.

If that surprises you, you're managing the wrong number.

In a traditional loan, term is everything. It sets your amortization, your total interest, your monthly payment. Optimizing the term is the whole game. So borrowers arrive at Bitcoin-backed credit trained to ask "what's the term?"

Wrong question.

Against Bitcoin, term barely touches your outcome. One number does: LTV.

Your draw LTV sets your buffer. Your liquidation LTV sets your line. The distance between them is the only thing standing between you and a forced sale. Term doesn't move either.

This is why "credit line" is the honest frame, not "loan." A loan is a schedule you're working down. A credit line is a position you're holding and a position is defined by how much room it has, not by when it's due.

LTV is the room. That's the whole game.

Thinking in loan terms actively hurts you. It pulls attention toward a date and away from the buffer, so people take a comfortable-sounding term, draw too aggressively, and get liquidated well before that date ever mattered.

🚨 The deadline was never the risk. The draw was. 🚨

"Liquidation LTV: 80%" is three decisions, not one

One line on your dashboard. Reads as simple. It isn't.

That single number is three separate decisions and getting any of them wrong is how Bitcoin borrowers get liquidated.

First, get rational about the downside. Over the last 12 months, BTC went $126K to roughly $60K. A ~52% drawdown, the largest of this cycle, with two 30%+ corrections before it. Loans last months, not years. A 30% drop inside your loan's life isn't a tail risk. It's the base case.

Decision 1 - the liquidation LTV

The line itself. Industry sits around 80%, with margin calls often earlier (~70%). Cross it and the lender acts, not you.

Decision 2 - your draw LTV

The only dial you control.

• 80% line, draw at 50% → BTC must fall ~37.5% to liquidate you.
• Draw at 70% → just ~12.5% does it.
• Draw at 35% → you need a ~56% fall. That one clears February.

Same line. Completely different odds.

Note what that means against the drawdown above. A February-sized move, call it 47.5% peak to trough, takes out the 50% draw and the 70% draw. Surviving the worst month of this cycle required drawing well under half your line.

Decision 3 - how it liquidates

The one people skip.

Full: the entire position closes. One wick and you're out.

Partial: only enough is sold to cure you back to a target LTV. Most of your stack survives.

Same word. Two different products.

And if it's partial, mind the gap. A platform that cures to 75% from an 85% trigger sells less, but leaves you a thin 10% buffer, so you re-liquidate easily on the next leg down. One that cures to 65% sells more, but resets you with real room.

So a higher cure threshold isn't automatically safer. It's a trade: smaller haircut now vs. getting hit again later. These numbers differ by platform. Read both the trigger and the cure.

The playbook

"Liquidation: 80%" is really three questions:

1. Where's the line?
2. Full or partial?
3. If partial, what does it cure to - and how much room does that leave?

Then size your draw LTV to survive a February. Not a calm market.

Stop asking "how long do I have?" Start asking "how much price movement can my buffer absorb?" Manage the position, not the calendar. Set your draw LTV first, and let it, not a term decide how much you borrow.

You borrow against Bitcoin to keep your Bitcoin. Every decision above is downstream of that.