Home › Borrow against bitcoin for cashflow
Borrowing against bitcoin for cashflow: how the preferred-dividend strategy works
Educational only, not financial, legal or tax advice. Borrowing to invest increases risk; you can lose your bitcoin. This page explains how the strategy works and where it breaks. It isn't a recommendation to do it.
Here's the idea: instead of selling your bitcoin, you post it as collateral for a US-dollar loan, use the dollars to buy a Bitcoin-backed preferred stock such as STRC or SATA, and let the preferred's dividends pay the loan interest. Whatever is left over is cashflow. You keep your bitcoin, but you take on a loan that can go wrong in a hurry if bitcoin falls.
"As a Bitcoiner, I can't imagine anything better than cashflow backed by Bitcoin." Anna borrows against her bitcoin to buy preferreds for cashflow. That adds liquidation risk, and it's her personal choice, not a recommendation.
Anna, founder of YieldVisa. She holds positions in some of the preferreds covered here. Her results aren't a promise of yours.
I'm writing this the way I'd explain it to a friend: here's how it works, here's the math, and here's every way it can hurt you. If you only read one section, read the risks.
How it works, step by step
- Decide what you can afford to lose. Start with the worst case: a liquidation where the lender sells some or all of your collateral. Only pledge bitcoin you could live without, and keep some spare bitcoin or cash outside the loan to defend it.
- Pick a lender and read the actual loan agreement. Bitcoin-backed loans and lines of credit differ a lot: interest rate, fees, how LTV is measured, what triggers a margin call, how much warning you get, and what they do with your bitcoin while they hold it. Use the checklist below.
- Post your bitcoin as collateral. You send BTC to the lender or its custodian. From then on, it's working as security for the loan, and you generally can't move it until the loan is repaid.
- Borrow at a low loan-to-value (LTV). LTV is the loan divided by the value of your bitcoin. The lower you start, the further bitcoin can fall before anything bad happens.
- Move the dollars to a brokerage account that lets you buy US-listed preferred stocks. If you live abroad, check that your broker serves residents of your country.
- Buy the preferred. STRF, STRC, STRK and STRD are issued by Strategy; SATA and SATS by Strive. They pay different rates on a $100 stated amount, on different schedules, with different rules about missed payments (see the rates table).
- Let dividends cover the interest. If the dividends are bigger than the interest, the difference is your cashflow. If they're smaller, you're paying to hold the position.
- Watch your LTV closely. Set price alerts well above your margin-call price, and know exactly how you'd respond: add bitcoin, pay down the loan, or sell preferreds.
- Have an exit. Know how you'd repay the loan, whether by selling the preferreds, using other savings, or both, and what that would cost if the preferreds are trading below what you paid.
LTV, margin calls and liquidation
Three numbers decide how much room you have. Your lender sets two of them; you choose the first.
- Starting LTV: your loan divided by the value of your collateral.
- Margin-call LTV: the level at which the lender asks you to add collateral or pay down the loan, usually within a deadline.
- Liquidation LTV: the level at which the lender can sell your bitcoin to cover the loan, sometimes without waiting for you.
Your loan balance doesn't shrink when bitcoin falls, so your LTV rises. That's why you can work out in advance the exact bitcoin price that triggers each step:
LTV = loan ÷ (BTC × BTC price) BTC price at margin call = loan ÷ (BTC × margin-call LTV) BTC price at liquidation = loan ÷ (BTC × liquidation LTV) Drop to get there = 1 − (trigger price ÷ today's price)
You post 1 BTC when bitcoin is $100,000 and borrow $30,000, a 30% LTV. If your loan's margin-call LTV were 70%, the margin call would come at $30,000 ÷ 0.70 ≈ $42,857, a drop of about 57%. At an 80% liquidation LTV, liquidation would come at $30,000 ÷ 0.80 = $37,500, a drop of 62.5%.
Start at 50% LTV instead and the same margin call arrives after a drop of only about 29%. Bitcoin is volatile, and drops that size have happened before.
A few details that matter more than they look: some lenders measure LTV on a different price than the one you see, some add unpaid interest to the loan balance (which raises your LTV over time), and some liquidate only part of your collateral while others close the whole loan. Liquidation usually also comes with a fee. Ask.
The spread: dividends vs interest
Your cashflow is the gap between what the preferred pays and what the loan costs:
Annual dividends = shares × $100 stated amount × dividend rate Annual interest = loan × APR Net cashflow = annual dividends − annual interest
Two things trip people up. First, the dividend rate is paid on the $100 stated amount, not on what you paid. If you buy below $100, your yield is higher than the headline rate; above $100, it's lower. Second, fees come off the top: an origination fee means you invest less than you borrow, but you pay interest on all of it.
Borrow $30,000 at a 10% APR with a 2% origination fee. That leaves $29,400, which buys 294 shares of a 12% preferred at $100. Dividends: 294 × $12 = $3,528 a year, if paid in full. Interest: $3,000 a year. Net: about $528 a year, or $44 a month. Subtract the $600 fee, and the first year is roughly −$72.
At a 13% APR the same position loses about $372 a year before the fee. A thin spread can turn negative with one rate change, on either side.
Here are the dividend rates we've verified in each issuer's own filings. Rates marked variable are reset by the issuer and can go down.
| Preferred | Issuer | Rate | Per share / yr | Type | Primary source |
|---|---|---|---|---|---|
| STRF | Strategy Inc | 10.00% | $10.00 | Fixed, cumulative | strategy.com |
| STRC | Strategy Inc | 12.00% | $12.00 | Variable, set by the issuer (12.00% for the Oct 16 – Nov 15, 2026 period) | sec.gov |
| STRK | Strategy Inc | 8.00% | $8.00 | Fixed, cumulative, convertible | strategy.com |
| STRD | Strategy Inc | 10.00% | $10.00 | Fixed, non-cumulative | strategy.com |
| SATA | Strive Inc | 13.00% | $13.00 | Variable (13.00% for Oct and Nov 2026, reset monthly) | sec.gov |
| SATS | Strive Inc | 15.00% | $15.00 | Fixed | sec.gov |
Dividends on all of these are declared at the issuer's discretion and aren't guaranteed. STRD is non-cumulative: a skipped STRD dividend is not owed later. See each preferred's page for its schedule and history.
Bitcoin-backed lenders
YieldVisa doesn't currently receive fees from lenders. If that changes, we'll say so here and on the disclosure page. See our affiliate disclosure.
Bitcoin-backed loan cashflow calculator
Everything stays in your browser. We don't save or send anything you type. The numbers already filled in are examples, not any lender's terms and not today's prices. Replace them with your own.
What this would look like
If bitcoin falls
| BTC move | BTC price | Collateral value | LTV | Status |
|---|
Assumptions: interest-only loan at a fixed APR, paid each month from dividends; whole shares only; dividends paid in full at today's rate (they're declared at the issuer's discretion, and variable rates can be cut); no taxes, broker fees, or price changes in the preferred. Real loans can compound, reprice, or use different LTV math. Check your loan agreement.
Educational only, not financial, legal or tax advice. Borrowing to invest increases risk; you can lose your bitcoin.
How it's taxed
Taxes are a big part of the appeal for a lot of people, and they're also where it's easiest to assume too much. Here's what we could confirm from issuer filings and the IRS, and what we couldn't.
The dividends: mostly return of capital (so far)
- Strategy (STRF, STRC, STRK, STRD): 100% of 2025 distributions on Strategy's preferreds were treated as a nontaxable return of capital (ROC) to the extent of your tax basis, and Strategy expects ROC treatment "for the foreseeable future (i.e., ten years or more)", while saying its expectations "may change". Strategy 8-K, Ex. 99.1 Its Q1 2026 Form 8937 expects the same for 2026. Form 8937, Q1 2026
- SATA: Strive says SATA distributions not paid out of earnings and profits are a "tax-deferred recovery of capital" for US investors. Strive 8-K, Oct 12, 2026 Its September 2026 Form 8937 expects the distributions to be nontaxable ROC. Form 8937, Sep 2026
- SATS: Strive hasn't published a SATS-specific ROC statement or Form 8937 yet. Not yet verified
What ROC means for you (US taxpayers): a ROC payment isn't taxed as income when you receive it. It lowers your cost basis in the shares instead. Once your basis reaches zero, further distributions are taxed as capital gain (long-term if you've held the shares more than a year). STRC prospectus (424B5) The ROC portion shows up on your Form 1099-DIV as a nondividend distribution. So ROC defers tax rather than erasing it: a lower basis means a bigger gain when you sell. ROC status is decided each year from the issuer's earnings and profits, so it's an expectation, not a guarantee.
The loan interest
The IRS says that if you borrow money to buy property you hold for investment, the interest is investment interest, and the deduction is generally limited to your net investment income, with the unused part carried forward to the next year. IRS Publication 550 What we haven't verified is how that limit works when your preferred pays return of capital instead of dividends, or how interest on a bitcoin-backed loan is traced to what you bought. Not yet verified Don't count on a deduction until a tax professional has looked at your situation.
Posting bitcoin as collateral
We haven't found an IRS source that says whether handing bitcoin to a lender as collateral could ever be treated as a sale, for example with lenders that take title to it or lend it out. Not yet verified Ask your CPA before you sign.
If you live abroad
- US citizens and green-card holders abroad are taxed on worldwide income, so the rules above apply to you wherever you live. IRS The Foreign Earned Income Exclusion doesn't cover dividends or other investment income. IRS Pub 54
- Non-US persons: the dividend portion of a distribution generally faces 30% US withholding, or a lower treaty rate with Form W-8BEN. A withholding agent may choose not to withhold on the ROC portion, so results vary by broker. IRS Pub 515
- Your country of residence may tax these payments under its own rules. No country's official sources we've checked say how a US return-of-capital payment is treated locally. Not yet verified See your country page for its foreign-dividend rule, and our guide to taxes for expats and non-US investors.
The risks (please read these)
- A bitcoin crash can liquidate you. The SEC warns that crypto assets “can be exceptionally volatile” (SEC investor alert, Mar 2023; checked 2026-10-26). A fast drop can push your loan to a margin call or liquidation. If it drops to your liquidation price, the lender can sell your bitcoin, often at the worst moment, and you may also pay a liquidation fee. You'd lose the bitcoin you were trying to keep.
- Your income and your collateral are tied to the same thing. These preferreds are issued by companies whose main asset is bitcoin. When bitcoin falls hard, their prices can fall too, right when you might need to sell them to pay down the loan. Diversifying across these six tickers doesn't remove that link.
- Dividends can be cut or stopped. Each issuer declares dividends at its discretion. Cumulative preferreds (STRF, STRK) owe skipped dividends later; non-cumulative STRD does not. Your loan interest is due either way.
- Variable rates can go down. STRC's rate is set by Strategy for each monthly period, and SATA's is reset monthly by Strive's board. A rate cut shrinks your spread overnight.
- Your loan rate can go up. Many loans and credit lines have variable rates or reprice at renewal. Read how and when yours can change.
- The lender can fail. Your bitcoin sits with the lender or its custodian. If the lender lends it out ("rehypothecation") or goes bankrupt, you may end up as an unsecured creditor, waiting a long time to get some or none of it back. Crypto lenders have failed before: Celsius, which offered loans backed by customers' crypto, filed for bankruptcy in July 2022 (FTC, Jul 2023), and the SEC notes it is unclear how much customers of bankrupt crypto firms can recover (SEC; checked 2026-10-26).
- Taxes can change. ROC treatment depends on each issuer's earnings and profits every year, and issuers say their expectations may change.
- Selling preferreds to repay can lock in a loss. Preferreds trade above and below their $100 stated amount. If you need to sell when prices are down, you may get back less than you borrowed.
Things careful borrowers do: start at a low LTV, keep spare bitcoin or cash ready to add, set alerts well above the margin-call price, pick lenders that don't lend out your collateral, and size the position so a liquidation wouldn't change their life.
Questions to ask a lender
- What's the APR, is it fixed or variable, and when can it change?
- What fees are there: origination, early repayment, withdrawal, liquidation?
- What's the maximum starting LTV, the margin-call LTV and the liquidation LTV?
- Which bitcoin price do you use to measure LTV, and how often?
- How do you warn me about a margin call (email, SMS, app), and how long do I have to respond?
- On liquidation, do you sell only enough to get back under the limit, or close the whole loan?
- Is unpaid interest added to the loan balance? Can I pay interest monthly?
- Who holds my bitcoin? Is it in a segregated account, and can I verify it on-chain?
- Do you lend out, pledge or rehypothecate my collateral? Is that in writing?
- Do you take legal title to my bitcoin? What happens to it if you go bankrupt?
- Do you serve residents of my country, and which documents do you need?
- Is there a minimum or maximum loan size or term? What happens at the end of the term?
- What tax forms will you send me?
Talk to a crypto-savvy CPA
Return of capital, interest deductions, collateral, and the tax rules where you live all interact. A tax professional who knows bitcoin and these preferreds can tell you how it works for you, before you borrow.
FAQ
Can I borrow against bitcoin without selling it?
Yes. That's what a bitcoin-backed loan or line of credit is: you pledge bitcoin as collateral and borrow dollars against it. You keep exposure to bitcoin's price, but you can lose the bitcoin if its price falls to your loan's liquidation level.
What LTV is safe?
No LTV is risk-free. The lower your starting LTV, the bigger the drop you can survive. Use the calculator to see the bitcoin price at your margin call and liquidation, and compare that drop with bitcoin's past crashes.
What happens if the preferred cuts its dividend?
Your cashflow shrinks or turns negative, but your loan interest stays the same. You'd need to cover it from other money or sell shares.
Are the dividends taxed?
For US taxpayers, Strategy's preferred distributions were 100% return of capital in 2025, and Strive expects SATA's to be return of capital too. ROC lowers your cost basis instead of being taxed as income when paid. It's decided each year, and SATS doesn't have its own ROC filing yet.
Is the loan interest tax-deductible?
The IRS treats interest on money borrowed to buy investments as investment interest, generally deductible only up to your net investment income. How that works when your income is return of capital hasn't been verified, so ask a CPA.
Educational only, not financial, legal or tax advice. Borrowing to invest increases risk; you can lose your bitcoin. Anna holds positions in some securities covered on this site. Rates and terms change; check the issuer's latest filing and your loan agreement before acting.