High Impact Risk

Collateral Value Fluctuations

Rapid market swings can increase liquidation risk.

What is this risk?

Bitcoin's price can move significantly in short periods — sometimes 10-20% in a single day. When you use Bitcoin as collateral, these price swings directly affect your loan's health. A sudden drop in Bitcoin's value means your collateral becomes worth less, potentially triggering margin calls or even liquidation. This volatility is both what makes Bitcoin attractive as an investment and what makes it risky as collateral.

Think of it this way...

“Like real estate in a boom-and-bust market, Bitcoin prices can swing wildly overnight. Imagine owning a house that could lose 30% of its value in a week — you'd want a significant equity cushion before borrowing against it.”

How to Protect Yourself

Practical steps you can take to reduce or manage this risk

Keep your LTV conservative (below 50%) to provide a large buffer against sudden drops — the lower your LTV, the bigger the price drop you can survive.

Set up price alerts on your phone so you're immediately notified if Bitcoin drops significantly.

Keep some extra Bitcoin or stablecoins available to add as collateral if needed — don't put 100% of your holdings into a loan.

Consider your time horizon: if you can't monitor your position during market volatility, use an even lower LTV.