Need Cash? Sell Bitcoin or Borrow the Smart Way

You need cash for a big purchase or just life expenses. Do you cash out some BTC, giving up future upside plus paying capital gains tax, or borrow against your stack, pay interest, and manage the risks of a loan?

This guide provides a clear framework for making that decision. We’ll break down the pros and cons of each approach and offer an easy to use calculator so you can run the numbers and make the best decision for your situation.

TL;DR

Selling → simple, taxable, lose future upside • Borrowing → keep upside, tax advantages, costs interest + attention • Run both scenarios → pick the lower total cost.

1. Decision Point

Meet Carla, a long-term HODLer who needs $50,000 for a home renovation. She owns 2 BTC, purchased in 2019. Bitcoin trades at $100,000 today. Should Carla sell a quarter of her stack (0.5 BTC) or borrow against it?

Keep Carla in mind as we explore the two options.

2. Selling: Quick Look

2.1 Capital-Gains Tax

Carla’s cost base for her BTC is roughly $5,000 per coin. Selling 0.5 BTC today nets $50,000 and triggers a long-term capital-gain of $47,500. At a combined federal + state rate of 20%, she’ll owe $9,500 in tax. Thus her net proceeds are $40,500.

2.2 Lost Upside

If Bitcoin doubles to $200,000 next cycle, Carla’s 0.5 BTC would be worth $100,000, a $50,000 opportunity cost on top of the $9,500 tax bill.

3. Borrowing: The Tradeoffs

3.1 BTC Loans in 80 Seconds

1. Pledge BTC to a lender or multi-sig vault.
2. Borrow cash up to a loan-to-value (LTV) limit (20–60%).
3. Monitor LTV: if price falls, top-up or repay. Ensure that you have enough BTC to avoid liquidation.
4. Repay principal + interest to reclaim your coins.

3.2 Three key Loan Levers

3.3 Crunching Carla’s Math

Carla borrows $50,000 at a 50% LTV.

Required collateral = 1 BTC ($50,000 ÷ 0.50 = $100,000 ≈ 1 BTC)

Lender liquidates at 80% LTV:

Liquidation price = Debt ÷ (BTC pledged × 0.80)
                  = $50,000 ÷ (1.0 × 0.80)
                  = $62,500

Takeaway: If Bitcoin drops 37.5% from $100k to about $62.5k, Carla will need to post additional collateral or her loan will be closed. To reset the loan to 50% LTV, Carla will need to post an additional 0.6 BTC.

3.4 Questions Before You Borrow

1. Do I have enough collateral e.g. if BTC drops 50%?
2. What is the lender’s custody model - and do they rehypothecate?
3. Does the Lender have clear margin call, liquidation & top-up policies - plus an easy process to do so?

Each Yes strengthens the borrow case; each No supports selling.

4. Your Next Steps

1. Define the need. How much cash do you need?
2. Plug in the numbers. Use the calculator to compare Selling vs Borrowing.