The wealthy play by a different set of rules. While most of us are taught to work hard, save cash, and then slowly sell off our investments to pay the bills in retirement, the ultra-rich do the exact opposite. They hoard assets and never sell them.
This concept is known as the Buy Borrow Die strategy.
For a long time, this was a game reserved for real estate tycoons and billionaires with massive stock portfolios.
But things have changed. With the rise of Bitcoin as pristine collateral, the Buy Borrow Die strategy is now open to anyone disciplined enough to build a serious position.
In this post, we are going to break down exactly how this works with Bitcoin. We will run the numbers using our InsightXO simulators to see if it makes sense for you, and we will have an honest talk about the risks, especially looking at Loan-to-Value ratios and volatility.
Key Takeaways
- The Buy Borrow Die strategy lets you access cash through debt, avoiding the capital gains tax that usually eats up your wealth when you sell.
- By using Bitcoin collateralized loans instead of selling, you keep all the future upside of your asset, which often grows faster than the interest on your loan.
- To pull this off safely, you need a massive collateral fortress and strict discipline with low LTV ratios to survive Bitcoin’s wild price swings.
What is the Buy Borrow Die Strategy?
The concept is simple. Taxes eat up your wealth faster than anything else. When you sell an asset that has gone up in value, you trigger a taxable event called Capital Gains Tax.
But when you borrow against an asset, that money is tax-free.
Here is the three-step breakdown of the Buy Borrow Die strategy
- Buy and Accumulate: You buy assets that go up in value, like Bitcoin, and you hold onto them tight.
- Borrow and Leverage: Instead of selling your Bitcoin to buy a car or pay for groceries, you use it as collateral to take out a loan. You live off that loan money. Since debt isn’t income, the IRS generally doesn’t ask for a cut. You pay zero dollars in taxes.
- Die and Estate Planning: Ideally, you hold these assets until the end. Under current US tax laws, your heirs often get a step-up in basis. This essentially resets the tax clock, allowing them to sell enough to pay off your loans without a massive tax bill.
The Math: Selling vs. Borrowing
Why bother with Bitcoin collateralized loans? Why not just sell a little bit of your portfolio every year? Let’s look at the numbers for a hypothetical need of $50,000.
| Metric | Option A: Selling Bitcoin | Option B: Borrowing Against Bitcoin |
| Cash Needed | $50,000 | $50,000 |
| Tax Impact | Capital Gains Tax (~23.8%) | None (Debt is not income) |
| Cost | You lose ~$15,000 in taxes immediately | Interest Expense (~12% APR) = $6,000/yr |
| Asset Status | Bitcoin is gone forever | You keep the Bitcoin |
| Upside | None (Sold) | You capture all future appreciation |
The Buy Borrow Die strategy works as long as your assets grow faster than your interest rate. If Bitcoin goes up by 20 percent and the bank asks for 12 percent, you are still winning by 8 percent.
It is that simple. You are effectively getting paid to borrow money. For the nitty-gritty on tax rules, you can always check the IRS guidelines on investment income.
The Accumulation Phase (Building the Fortress)
To make this work, you need a solid foundation. This is where asset accumulation comes in. You cannot borrow safely against a small portfolio because Bitcoin moves fast.
You need a big enough buffer so that your loan is just a tiny, safe fraction of your total wealth.
Let’s run a quick scenario using our Bitcoin DCA Calculator.
Meet Alex. He is 35 years old. He wants to retire at 50, giving him 15 years to build his stack. He plans to buy Bitcoin aggressively to build a “collateral fortress” he can borrow against later.
The Scenario:
- Initial Investment: $10,000
- Monthly Investment: $1,500
- Investment Period: 15 Years
- Bitcoin CAGR: 20%
- Inflation: 3%
- BTC Price: $86,000
Let’s see what Alex’s future looks like if he sticks to the plan.
In 15 years, thanks to compound interest and a modest 20 percent growth rate, Alex’s portfolio could grow into the millions. This isn’t just a number on a screen; it’s his borrowing base.
If you don’t have this base, the Buy Borrow Die strategy won’t work.
You need enough assets so that a small loan for living expenses is just a drop in the bucket compared to your total wealth.
The Borrow Phase (LTV Management)
Once you have built your stack, the game changes. You stop buying and start leveraging. You go to a lender, pledge your Bitcoin, and take out cash.
The Golden Rule: Watch Your LTV
Loan-to-Value, or LTV, is the most important number you need to know. It is the ratio of your loan size to your Bitcoin’s value.
High risk loans, like borrowing 50 percent of your stack, are a recipe for disaster. A 20 to 30 percent market dip—which is normal for Bitcoin—could wipe you out.
The safe zone is borrowing just 20 to 25 percent of your stack.
In this range, Bitcoin can drop 60 to 70 percent, and your Bitcoin collateralized loans stay safe.
Alex’s Retirement Calculation
Alex needs $6,000 a month in today’s money to live comfortably. Let’s use the Bitcoin FIRE Simulator to see if his stack can support this lifestyle without him ever having to sell a single satoshi.
1. Accumulation Phase (Growth)
2. Decumulation Phase (Retirement)
If your safe limit is higher than what you plan to spend, you are in great shape. It means your money is growing faster than you can spend it. In our strategy, this creates a permanent safety buffer.
As your Bitcoin goes up in value, your LTV naturally goes down, giving you room to refinance or borrow more without adding a single penny of new collateral.
Risks – The Widowmaker
Here is the catch. The Buy Borrow Die strategy with Bitcoin has one fatal flaw compared to real estate: volatility.
If you borrow against a house, the bank doesn’t check the Zillow price every hour. But if you borrow against Bitcoin, the protocol checks the price every second.
If the price crashes, you face what we call a liquidation.
Liquidation Math: Know Your Number
Liquidation is when the lender sells your Bitcoin to pay off your loan because the value dropped too low.
For example, say you borrow $50,000 against 1.45 BTC (worth $125,000). If your liquidation threshold is 80 percent, the math is unforgiving.
In this scenario, if Bitcoin drops from $86,000 to about $43,100, you get liquidated. That is a 50 percent drop.
It sounds like a big buffer, but anyone who has been in crypto for a while knows that 50 percent drops happen.
The Cash Cushion Strategy
You need a rainy day fund. Actually, make that a rainy year fund. We recommend keeping 12 to 24 months of living expenses in cash or T-Bills.
This is your shield. If Bitcoin enters a bear market, you don’t take out new loans. You live off your cash cushion.
If the price gets too close to your liquidation number, you use that cash to pay down the loan, instantly lowering your risk.
Understanding the Infinite Growth Graph
You might look at the charts above, or the 4% Rule Calculator below, and think, “This looks too good to be true.” The portfolio value just keeps going up forever.
The Math: This isn’t a glitch. It is the power of Positive Compounding. If your money grows faster than you spend it, your balance will naturally grow.
The Reality Check: But real life is not a straight line. Bitcoin is volatile. If the market crashes 50 percent the day after you retire, that smooth graph breaks.
The Solution: To make this chart your reality, you need that cash cushion we talked about. Keep 2 to 3 years of living expenses in cash or bonds.
This stops you from having to sell or borrow when the market is down.
The Die Phase (Legacy Planning)
This is the part nobody likes to talk about, but it is crucial for your legacy. The final piece of the Buy Borrow Die strategy is wealth transfer. Under US tax code, assets inherited by your heirs often get a step-up in basis.
Basically, if you bought Bitcoin at $10,000 and passed away when it was worth $1,000,000, the IRS treats it as if your heirs bought it at $1,000,000.
They can sell enough Bitcoin to pay off your loans immediately, and they will likely owe zero capital gains tax. For more on how this works, check out resources like the Legal Information Institute.
Just remember, estate planning with Bitcoin is tricky. You need to make sure your heirs can actually find and access your private keys. If they can’t access the funds, they can’t pay off the debt.
Don’t Sell Your Future
The Buy Borrow Die strategy turns your Bitcoin from a speculative coin into a personal bank. It lets you spend your wealth without ever reducing your stack.
But it takes discipline to build the fortress and caution to manage the debt.
Your Next Step: Don’t just guess. Run the numbers yourself. Use the DCA Calculator to see how long it will take to build your fortress, and then check the Retirement Dashboard to see if your stack is ready to support your life.
FAQ
Is the Buy Borrow Die strategy legal in the US?
Yes. Borrowing against assets is a standard financial practice the wealthy have used for decades. The IRS generally doesn’t treat loans as income. But tax laws change, so always talk to a pro.
What happens if Bitcoin crashes 80%?
If your loan is too big, you will get liquidated and forced to sell. That is why we preach a low LTV of 20 to 25 percent and a big cash cushion. You need to be able to survive the winter.
Can I deduct the interest on my Bitcoin loan?
Sometimes. If you use the loan money to buy more investments, like stocks or crypto, you might be able to deduct the interest. If you use it to buy a boat or groceries, usually not.