Case Study: Earning Income from Your Bitcoin
In specific market conditions, you can generate monthly yield by borrowing against Bitcoin and deploying capital for passive income.
How the 'Free Salary' Strategy Works
In this strategy, the user leverages the long-term appreciation potential of Bitcoin to finance their monthly expenses—effectively turning a portion of their BTC holdings into a self-repaying salary.
The core idea is this:
You take out a stablecoin loan (e.g. USDT) against your BTC, use it to buy even more BTC, and then use the extra BTC as additional collateral. This strengthens your position by lowering the loan-to-value (LTV) ratio and reducing the risk of liquidation. With this new, more secure collateral base, you draw smaller amounts of USD every month to pay for your expenses.
If Bitcoin's price appreciates significantly over the next 1–2 years—as you expect—then the BTC you bought at the beginning will be worth much more than the total amount you’ve withdrawn for living expenses. In that case, you’ve effectively funded your lifestyle without selling any BTC—and with minimal net cost.
It’s a bet on time, discipline, and BTC's long-term growth.
Jane's Strategy: A Bitcoin-Backed Income Stream
Jane holds 2 BTC, valued at $100,000. She wants to generate monthly income without selling her Bitcoin. Here's how she does it—when market conditions offer low borrowing costs and high enough DeFi yields.
You deposit BTC as collateral and borrow USDT, believing the BTC price will rise over the next 18–24 months.
You immediately use the USDT to buy more BTC and re-deposit it as collateral. This reduces your LTV and pushes your liquidation price much lower.
With this reinforced collateral position, you now withdraw smaller USDT amounts monthly to cover living expenses.
If BTC doubles in price during the planned time frame (e.g. 19 months), the value of your BTC collateral far exceeds your withdrawals. The BTC you originally bought with your loan more than offsets what you’ve spent.
You funded your lifestyle without selling BTC. And if BTC appreciates as expected, the initial loan pays for itself—making your monthly withdrawals effectively free.
Benefits of the Strategy
Earn passive income from your Bitcoin holdings by leveraging favorable interest rate spreads.
Avoid selling your BTC and still gain financial utility from it—ideal in bullish markets.
Use yield to cover loan repayments or reinvest for further compounding.
Loans are not taxable events in most jurisdictions, making this more efficient than selling BTC.
Estimate Your Potential Yield
⚠️ Risks to Consider
If BTC fails to rise or drops significantly, you may face liquidation or need to inject more collateral.
Even with low LTV, sudden crashes (like March 2020 or FTX collapse) could push your position toward liquidation unexpectedly.
Loan interest accumulates over time. If BTC doesn’t appreciate fast enough, the growing debt may outweigh gains.
Predicting BTC’s price in a specific timeframe (like “doubling in 19 months”) is speculative. Market cycles vary.
If your loan provider gets hacked, becomes insolvent, or changes terms (e.g. Celsius, BlockFi cases), you could lose funds.
Loan proceeds might not be taxable, but using them repeatedly or long-term may raise regulatory or tax questions depending on your jurisdiction.
Monthly withdrawals require strong budgeting. Over-borrowing may erode the benefits and push you into unsustainable debt.
Supporting Quotes
Bitcoin lending is similar to staking in terms of its potential to generate passive income.
Source: NerdWallet
With Coinbase Earn, we'll help you put your assets to work in the cryptoeconomy so you can grow your crypto holdings with little effort.
Source: Coinbase
You can start earning passive income from cryptocurrency — even if you’re a beginner! Interest rewards are one of the easiest ways to start earning passive income — with exchanges like Coinbase offering rewards over 5% on USDC!
Source: CoinLedger
Depositing Bitcoin in interest-bearing accounts allows you to earn passive income.
Source: 99bitcoins.com
More Case Studies
Choose a provider and start borrowing today.
Borrow with Sovryn ZeroBorrow with UnchainedBorrow with LednBorrow with SALT LendingBorrow with NexoBorrow with CoinbaseBorrow with BinanceBorrow with MiloBorrow with AaveSome links are referrals that help support the site.