Been thinking about what nostr:nprofile1qqsvf646uxlreajhhsv9tms9u6w7nuzeedaqty38z69cpwyhv89ufcqpp4mhxue69uhkummn9ekx7mqpr4mhxue69uhkummnw3ez6ur4vgh8wetvd3hhyer9wghxuet5tm8sjr said on nostr:nprofile1qqsg2zqd8wkhpnxu6lm5c2dyfa2mhpwte57apjae2ldp6g2mmwf3ypqpzemhxue69uhk2er9dchxummnw3ezumrpdejz7q2hwaehxw309anxjmr5v4ezumn0wd68ytnhd9hx2tmwwp6kyvtnx4uhzdnhv9j8wuncv3jngmrgveen2dn8dcmrg6rh0f6ksmnxvym8ywtddg6rwdnjx4eng6rtw4h85em6w9e8xdn3xaaquwrzjs podcast recently. Trying to work through the math.
Let’s say you start with 1 BTC, currently worth $100k. You borrow $10k against it (using BTC as collateral) and use that loan to buy 0.1 BTC straight away.
Now imagine Bitcoin grows at 20% per year, (very bearish) In Year 2, BTC is $120k, so 0.1 BTC now costs $12k. You take out a new $12k loan, use $11.2k of that to repay last year’s loan (including 12% interest), and with the $800 remaining, you buy a little more BTC about 0.0067 BTC.
You repeat this every year, take out a loan equal to the value of 0.1 BTC, repay the previous one, and stack the difference. Over time, you're gradually increasing your BTC stack with no additional cash input. Even though most of the new loan each year goes toward repaying the old one, you’re still adding small amounts of BTC every year and thanks to the rising price of Bitcoin, that value compounds.
After 20 years, you’ll have grown your stack from 1 BTC to around 1.2 BTC, that's a great return IMO, but if we bump that CAGR up to 60% you earn about 0.5 BTC, a massive return.
In other words, you’re letting your Bitcoin work for you, stacking a little more each year fairly safely,l and "passively", and without CGT.
The main issue is if Bitcoin drops, especially before you’ve built up much buffer you could face a liquidation risk if the value of your collateral drops too low.
For example, if BTC drops 50%, the same $10k loan suddenly represents double the risk, and you may be forced to top up collateral or sell BTC at a loss to cover the loan.
Is there anything I'm missing? because this seems like a great personal "strantagy" to me.
