Interest Accumulation
Loan interest can compound over time.
What is this risk?
Many Bitcoin-backed loans charge interest that compounds over time. If you're betting that Bitcoin will appreciate faster than your interest accumulates, you're taking a calculated risk. If Bitcoin stagnates or drops, or if you hold the loan longer than planned, the accumulated interest can significantly erode your position. Some borrowers underestimate how quickly interest adds up, especially during extended market downturns.
Think of it this way...
“Like a credit card balance that keeps growing when you only make minimum payments — except this debt is secured by an asset that might be losing value at the same time.”
How to Protect Yourself
Practical steps you can take to reduce or manage this risk
Calculate the total cost of your loan over its expected duration before committing.
Look for platforms offering 0% interest or low-interest options if available.
Have a clear repayment plan and timeline — don't let loans drag on indefinitely.
Monitor your loan regularly and pay down principal when possible.
Factor in interest accumulation when assessing whether a loan strategy makes sense.
Be realistic about Bitcoin appreciation timelines — don't assume rapid gains will bail you out.
See This Risk in Action
Explore real-world scenarios where this risk plays a role
Other Risks to Consider
Explore other risks to get a complete picture
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