Using Bitcoin-Backed Loans to Acquire Stablecoins (DAI)
Borrow against Bitcoin to access DAI liquidity without selling.
Strategy Overview
Introduction
One of the most common challenges for Bitcoin holders is how to access liquidity without selling their BTC. In times of volatility, borrowing against Bitcoin to obtain stablecoins like DAI can provide immediate purchasing power while preserving long-term upside.
Why This Works
Preserves Bitcoin upside: The borrower never sells their BTC, keeping exposure to long-term appreciation.
Access to liquidity: Immediate spending power in a stable medium, suitable for expenses or investments.
Self-repaying potential: If Bitcoin appreciates faster than interest, the collateral’s value growth can offset the debt.
Decentralized stability: DAI is governed by a decentralized system, aligning with Bitcoin’s ethos.
Risks and Mitigations
DeFi strategies come with unique risks that require careful consideration
Collateral volatility
Use conservative loan-to-value ratios and keep extra BTC on hand.
Stablecoin de-peg
Diversify or convert to fiat quickly if needed.
Smart contract or platform risk
Choose audited protocols and spread exposure.
Interest rate fluctuations
Fix rates when possible and monitor governance decisions.
Example Scenario
A borrower deposits $20,000 worth of BTC into a collateralized loan.
They borrow $5,000 worth of DAI at a 25% LTV.
Over 2 years, BTC doubles in value to $40,000.
The debt in DAI remains $5,000 plus interest, dropping the LTV to about 12.5%.
The borrower repays easily, reclaims their BTC, and the appreciation effectively covers the loan cost.
DeFi Requires Technical Understanding
Using Bitcoin to acquire DAI through DeFi protocols offers decentralization benefits but requires understanding of smart contracts, gas fees, and liquidation mechanics. Always start small and learn the system before committing significant funds.
Try the SimulatorMore Case Studies
Top Lending Platforms
Choose a provider and start borrowing today.
Some links are referrals that help support the site.