When Bitcoin prices drop, holders face a familiar dilemma: sell and lock in losses, or find another way to cover expenses while keeping your BTC.
We are breaking down how borrowing against Bitcoin works and what to consider before doing it in our blog post. https://nexo.com/blog/is-borrowing-against-bitcoin-a-good-idea?utm_source=facebook&utm_medium=post&utm_campaign=facebook_post_dwa_borrow_against_btc_0404_q226
Borrowing against Bitcoin means using your BTC as collateral to access funds, typically in stablecoins, without selling.
Your Bitcoin stays in your account. Your exposure to price movements remains intact. Once you repay, your BTC is fully unlocked.
The key variable to watch is your loan-to-value ratio, or LTV.
If Bitcoin's price rises after you borrow, your LTV drops and your position becomes more comfortable. If prices fall, your LTV increases and you may need to add collateral or repay part of the loan to stay within limits.
In the full article, we also cover the difference between defensive borrowing and conviction-based borrowing, the risks involved, and when selling may actually be the simpler choice.
Full breakdown in the blog.