Step by Step Guidance to Transform you from a Learner to an Earner.
- One powerful strategy that wealthy investors use is borrowing money against their assets instead of selling them. This lets them to (1) access cash while still owning assets that go up in value over time and (2) not pay taxes on this cash because borrowing isn't a taxable event, while selling is a taxable event.
- Bitcoin allows you to do this digitally with no credit check and no lengthy loan application process. You submit the collateral and you get the loan.
- Here is a step-by-step guide using services like Strike or Ledn, along with necessary cautions.
Part 1: Preparation and Planning
- Before you borrow, you need a plan and the right setup.
Step 1: Meet the Lender's Requirements
- You will need a specific amount of Bitcoin (BTC) ready to use as collateral.
- STRIKE requires you to have $10,000 worth of Bitcoin before you can borrow cash.
- LEDN requires $1,000 worth of Bitcoin before you can borrow cash.
- Ensure your Bitcoin is in a wallet that you can use with the lending app.
Step 2: Choose Your Lender
- For simplicity, many users start with a service like Strike or Ledn. Their apps handle the entire process.
- More advanced users might explore decentralized finance options like MakerDAO, which involve interacting with computer code directly.
Part 2: Setting Up the Loan (Using the App)
This process is usually done entirely within your chosen lender's application.
Step 3: Sign Up and Verify Your Account
Download the chosen app (Strike or Ledn) and create an account.
You will need to provide personal information (like your name and ID) as part of a Know Your Customer (KYC) check.
Step 4: Navigate to the Loan Section
Inside the app, find the "Borrow" or "Loans" section.
Step 5: Input Loan Details and Deposit Collateral
- Enter the amount of cash (fiat currency) you want to borrow.
- The app will tell you how much Bitcoin you need to deposit as collateral based on the Loan-to-Value (LTV) ratio (often around 50%).
- Transfer the required Bitcoin into the secure address provided by the app.
Step 6: Sign the Loan Agreement
- Review the loan terms, interest rate (APR), and repayment options carefully.
- Agree to the terms. There are typically no credit checks involved.
Step 7: Receive Your Cash
- The lender will send the cash to your linked bank account. This can happen within one business day in some cases.
Part 3: Management and Cautions
- Managing the loan is as important as setting it up.
- This is where you use advanced strategies to stay safe and grow your wealth.
Step 8: Manage Your Loan and Collateral
- Strategy: Monitor your loan's Loan-to-Value (LTV) ratio regularly.
- How it works: As the value of your Bitcoin collateral changes, your LTV will fluctuate. A higher LTV increases your risk of a margin call.
- The Benefit: Proactive management helps protect your Bitcoin from being sold by the lender and allows you to maintain control over your assets.
- Key Cautions & Guidance
- Caution Details
- Beware of Volatility If Bitcoin's price drops significantly, your LTV increases. The platform might issue a margin call or sell your collateral (liquidation) to pay off the loan.
- Manage Your LTV Aim for a low LTV initially (e.g., 20% to 30%). You can add more collateral later to lower your risk and avoid a margin call.
- Understand Interest Interest rates can impact the overall cost of your loan. Be aware of the annual percentage rate (APR) and how it affects your repayment amount.
- Platform Risk Be aware that platforms carry risks of technical issues, security breaches, or insolvency. Research and choose reputable platforms.
Part 4: Borrow to Build Wealth (The Compounding Strategy)
- This is the advanced method to transform your borrowed cash into an income machine.
- Create a Stream of Income: You should borrow cash to buy assets like Bitcoin, and then use it as liquidity on THORSwap to earn money.
- The Double Gain: You HODL (hold) your original Bitcoin to earn roughly 30-50% annual appreciation gains as the price goes up.
- The Compounding Effect: You borrow against that Bitcoin to buy more Bitcoin. You then invest that new Bitcoin as a Liquidity Provider (LP). Now you are earning appreciation gains on two piles of Bitcoin, plus you are earning trading fees (income) on the second pile. This is compounding!
- Lower Your Risk: This strategy means you always have extra cash or yield coming in to pay back your loan in an emergency.
- You can use your Bitcoin earnings to add back to your Strike or Ledn account. - This lowers your LTV ratio and protects you from liquidation while you continue "stacking" more Bitcoin.
- Reinvest: Alternatively, you can add your Bitcoin earnings back into your liquidity provider position to earn even more Bitcoin over time.
- By following this strategy in 2026, you aren't just a holder—you are a participant in a global financial system that rewards you for providing liquidity while keeping your assets secure.
The End of Chapter Two:
Did you Chapter One: Earning Yield on Your Bitcoin?
- If you missed it, I suggest you read my first chapter: Bitcoin Wealth Playbook: A Step-by-Step Guide, Chapter One Earn YIeld on your Bitcoin. LINK
If you read Chapter One: Earning Yield on Your Bitcoin Providing Liquidity your ready for Chapter Three : Mining Bitcoin. LINK
The End
✍️ About Me
I have written over 2000 articles about cryptocurrency, blockchain and decentralized finance. And I have written 120 articles on Bitcoin This Post is the Second Chapter in my book Bitcoin Wealth Playbook. These Step by Step Guides are meant to help my readers move from Learning about cryptocurrency wealth, to Earning cryptocurrency wealth.
See a list of other fun and short article written by me about Bitcoin below
The Pillars of Peer-to-Peer:
@shortsegments/chapter-two-my-journey-into-bitcoin-the-pillars-of-peertopeer-abb