00:01 Hey everyone. Should you borrow money
00:04 and buy Bitcoin with debt? You may have
00:06 heard people talking about the fact
00:08 that, hey, the interest rate I can get
00:10 if I borrow money is relatively low and
00:13 the return on Bitcoin is way higher. So,
00:15 why don’t I borrow money at whatever
00:18 interest rate and then make more money
00:19 on the Bitcoin? That is generally a bad
00:22 idea, but I wanted to provide the nuance
00:24 of why it’s usually a bad idea and what
00:27 exceptions there might be. Okay. So,
00:29 we’re going to work our way from the
00:33 worst ideas to the best ideas. So, the
00:36 worst idea is to borrow against anything
00:38 that is mark to market. M A R K to
00:43 market. M A R C K T market. Okay.
00:47 Anything that you don’t ever ever ever
00:49 want to borrow against something that is
00:51 marked to market because you can get a
00:54 margin call. A margin call means that
00:56 your collateral, which means the thing
00:58 that you are borrowing against, has
01:00 changed in price down and now you have
01:03 to provide more collateral. Otherwise,
01:05 they’re going to take your collateral.
01:07 Now, the only time this would happen is
01:09 if uh the things that are marked to
01:11 market would be things like a stock
01:12 portfolio, if you borrow against a stock
01:14 portfolio, or if you borrow against your
01:18 Bitcoin. Don’t ever borrow against your
01:21 Bitcoin to buy more Bitcoin. Don’t do
01:23 that. It’s I promise you’re going to
01:25 blow yourself up if you try to do that.
01:27 Uh so borrowing against your Bitcoin,
01:29 your Bitcoin is marked to market. Uh the
01:31 term mark tomarket means the price of
01:33 your collateral is floating by the
01:35 minute or by the hour or by the day
01:37 based on the price of the market. So if
01:39 you borrow against stocks, the stocks
01:40 are constantly going up and down. If you
01:42 borrow against Bitcoin, the Bitcoin’s
01:43 constantly going up and down. And what
01:45 happens is, let’s say you have I’m going
01:48 to use big round numbers. you have
01:50 $100,000 of Bitcoin and you borrow
01:52 $50,000 of that, which is a 50% loan to
01:55 value. Uh it’s called an LTV ratio, loan
01:58 to value ratio. So you borrow 50,000
02:00 against your 100,000. Now they get
02:03 they’re holding your $100,000 of
02:05 Bitcoin. It’s still yours, but they’re
02:07 holding it and they’re giving you
02:08 $50,000 of US and then you turn around
02:11 and buy more Bitcoin. Now, if everything
02:13 works out, then what’s going to happen
02:15 is uh you’ll repay the loan at whatever,
02:18 you know, 10% interest, but then you get
02:21 50% more Bitcoin. But the problem is if
02:24 the value of your $100,000 of Bitcoin
02:27 starts to drop, you’re going to get a
02:28 margin call because now 50,000 that you
02:31 borrowed is more than 50% of the value
02:33 of your Bitcoin. So, what happens is the
02:36 price of your Bitcoin, you borrow
02:38 $50,000 when the value of your Bitcoin
02:39 is $100,000. And then the value of your
02:42 Bitcoin starts to drop and it drops to
02:44 90,000 and then 80,000 and then 70,000
02:47 and you get notices from whoever you
02:49 borrowed from saying, “Hey, you have to
02:51 put up more collateral. You borrowed
02:53 $50,000. Your Bitcoin used to be worth
02:55 100. Now it’s only worth 70 or 80. You
02:58 got to put up 30, 20, $30,000 more
03:00 Bitcoin. Otherwise, you’re going to get
03:03 liquidated.” Liquidated means they keep
03:06 all of the Bitcoin you put up as
03:07 collateral. Um, now you still have the
03:09 $50,000, but you lost the $100,000. So,
03:12 you basically lost half your Bitcoin.
03:14 Um, and of course your 50,000 because
03:16 the price of Bitcoin’s dropping is now
03:18 only worth 35 or 40. So, don’t do that.
03:20 Don’t borrow against a stock portfolio
03:22 or a bond portfolio or just don’t borrow
03:25 against anything where the asset itself
03:27 is fluctuating in price and that is your
03:29 collateral. So, that’s the worst idea.
03:31 Okay. The next worst idea is to borrow
03:34 against your house to buy Bitcoin. Why?
03:37 Because if he gets if it if if it
03:39 doesn’t work out as you planned, your
03:41 house is at risk. Don’t do that. I would
03:43 never put my family’s residence where we
03:46 live. I would never put that at risk
03:49 because I borrowed against it to buy
03:51 more Bitcoin and then the Bitcoin went
03:52 down and then I couldn’t make the P
03:54 payments and then I lost the Bitcoin and
03:56 then I mean technically you wouldn’t
03:58 lose your house unless you stopped
03:59 making payments, but you might lose all
04:00 the equity in your house that you used
04:02 to buy Bitcoin. So I would generally not
04:04 do that. Now, it’s way less risky to do
04:07 that as compared to marktomarket because
04:09 the house the the value of your house
04:11 that’s appraised by the bank does not
04:12 change on a day-to-day basis. Um, so
04:15 it’s not it’s not like an appraiser
04:17 comes out to your house every single day
04:19 and says, “Ooh, a hail stom’s coming in.
04:21 Your house is now 20% less valuable
04:23 because it might get hit.” That doesn’t
04:24 happen with your house. So it is way
04:26 safer to borrow against your uh you know
04:30 to take out a home equity line of credit
04:32 uh heliloc a home equity line of credit
04:34 credit. It is a still say much safer to
04:37 do that as compared to borrowing against
04:38 your bitcoin or borrowing against a
04:40 stock portfolio or something like that
04:42 but is still extremely risky and I would
04:44 never recommend it and I would never do
04:45 it. I am never going to jeopardize my
04:48 house or the equity in my house um to
04:51 buy more bitcoin but again I’m not
04:53 everybody. I know people who do it. Um,
04:55 again, at least it’s way safer than
04:57 borrowing against Bitcoin to buy Bitcoin
04:59 or borrowing against stocks or something
05:01 like that to buy Bitcoin. Uh, but I
05:03 still wouldn’t do it. Okay, the next um
05:06 sort of less risky thing you could do is
05:09 borrow against your 401k, for example.
05:12 Again, you’re putting some of your
05:14 retirement at risk, but at least you’re
05:16 not jeopardizing where you live. Again,
05:18 would I do that? No, I would not do
05:20 that. and I have a very high risk
05:22 appetite, but I also have enough other
05:24 money to buy Bitcoin that I have never
05:26 had to think through what if I really
05:29 wanted to buy more Bitcoin and my only
05:31 asset was a 401k or the equity in my
05:35 house. If that was my only asset to buy
05:38 Bitcoin, I’ve just never had to think
05:40 through that because I’ve always had
05:41 other money I could use to buy Bitcoin.
05:43 So if you are in the place where the
05:46 only asset you have of any significant
05:49 value is the equity or your home or a
05:52 401k, my answer is I would never
05:54 recommend somebody borrow against that
05:56 to buy Bitcoin. Um
05:58 especially especially because everybody
06:01 starts talking about doing it when
06:02 Bitcoin’s setting new all-time record
06:04 highs. um if anyone was going to ever do
06:08 that, you know, the time to do it would
06:11 be right after FTX blew up back in 2022
06:14 or anytime in 2023 or even most of the
06:16 time in 2024. Uh but the problem is
06:19 everybody starts getting the bright idea
06:21 to borrow against their 401k or to
06:23 borrow against their house when Bitcoin
06:25 is up in the stratosphere setting new
06:28 all-time highs every day. It’s like way
06:31 up in the thin air of the atmosphere.
06:33 Um, and then everybody gets the bright
06:34 idea to borrow to buy more of it. So,
06:37 um, if somebody was going to do that, I
06:40 would say, “A, it’s a bad idea.” And if
06:42 they were like, if they were like,
06:44 “Joel, I’m not going to listen to you.
06:47 I’m going to borrow against my 401k or
06:49 I’m going to buy borrow against the
06:51 equity in my house to buy Bitcoin and
06:52 you can’t stop me. I would I’m going to
06:54 do it.” Then I would say a that’s a bad
06:56 idea and b at least do that when Bitcoin
06:60 is in a serious correction and
07:02 everybody’s talking about the end of the
07:03 world and Bitcoin’s never coming back
07:05 and it’s down 30% or 40% or something
07:08 like that. At least do it when Bitcoin
07:11 is massively on sale because at least
07:14 then you’re not risking, you know,
07:16 buying the top. Um, now I don’t think
07:19 buying Bitcoin at $120,000 is buying the
07:21 top, but I don’t know where I don’t know
07:23 where the top is of the cycle. I think
07:24 long-term it goes to a million dollars a
07:26 coin, but on its way to a million
07:28 dollars a coin, it could go through
07:30 multiple
07:32 20, 30, 40, 50% price corrections on the
07:35 way between here and a million dollars.
07:37 Um, and we’ve had two and a half all of
07:40 2023, all of 2024, and half of 2025 on a
07:44 serious bull market. I mean, we’ve been,
07:47 you know, the lowest point in November
07:49 of 2022 was 15,500. So, Bitcoin has been
07:52 on a tear, which again, a bunch of price
07:55 corrections of 20 30% along the way, but
07:58 we’ve been on a pretty epic tear from
08:00 15,500 in the in the fourth quarter of
08:03 2022 to the present. So, if you’re
08:06 getting the bright idea to borrow
08:07 against your house or your 401k today,
08:10 um, as James Czech, my favorite Bitcoin
08:12 analyst, would say, we are in the fourth
08:14 quarter of this ball game. Now, you
08:17 know, after we go through the fourth
08:18 quarter, then we start the first quarter
08:20 of the next cycle, which sucks. And I
08:23 don’t know, maybe it drops from here. I
08:25 don’t think so, but maybe it runs up to
08:28 180,000 and drops to 120 again, which
08:30 would be, I don’t know, a however
08:32 percent price drop. I don’t know. Nobody
08:34 knows what’s going to happen. But if
08:36 you’re going to borrow against your 401k
08:39 or your house and I can’t stop you and
08:41 you’re going to ignore my advice to not
08:43 do that, then the time to do that is not
08:46 when you’re setting new all-time high
08:47 record highs every day. The time would
08:49 be to do that when Bitcoin’s down in the
08:50 dumps. You know a lot about it. you have
08:52 deep conviction or at least we’ve been
08:55 grinding sideways for months on end with
08:58 which gives you some absolute cir
08:59 certainty that we’re not at the top of
09:01 the cycle because we’ve just been
09:02 grinding and grinding and grinding and
09:04 grinding sideways again right now we
09:06 just came off I mean we’re at record
09:08 high territory in the last 24 hours so
09:11 you know th that’s just it’s typically
09:13 an especially bad idea to borrow against
09:15 a 401k or a u home equity when you’re
09:19 setting record highs every other day
09:21 that’s generally the worst time to do
09:22 it. One second.
09:27 Okay, so we’ve covered never borrow
09:28 against your Bitcoin to buy more
09:30 Bitcoin. Never borrow against stocks or
09:32 anything else that changes in value on a
09:34 daily basis. Um we’ve also covered that
09:36 it’s a bad idea to borrow against your
09:38 house or your 401k uh to buy Bitcoin. Um
09:42 and but if you’re going to do that,
09:45 again, the time to do it is when
09:46 Bitcoin’s in a major price correction,
09:48 not when it’s setting record highs every
09:49 other day. Um then uh next up, is it a
09:53 good idea to borrow sorry to not pay off
09:58 a house or a car in order to buy
09:60 Bitcoin? Now I am much more open to
10:02 that. In my case, um I needed to buy a
10:05 new car cuz one of my kids turned 16 and
10:07 they needed a car. So they were getting
10:08 the 2010 Honda Odyssey family van that’s
10:12 15 years old with 230,000 mi on it,
10:14 which freed up somebody to get a new
10:16 vehicle. Well, it turned out I was in
10:18 the rotation and so I bought myself a
10:20 2026 Tesla Model Y, uh, which is like
10:23 the, you know, the most amazing car you
10:26 can buy in my opinion. It’s not the
10:28 expensive. The expensive Teslas are the
10:30 Model X and the Model S. So, it’s not
10:32 the expensive Tesla, it’s just the best
10:34 Tesla. And, uh, the Tesla Model Y, I
10:36 bought at 2026 back in March. Well,
10:38 Bitcoin was trading at $85,000 per coin,
10:41 858500.
10:43 And I did not want to sell the Bitcoin
10:45 to buy the Tesla, which I could have
10:46 done. and I had the Bitcoin. I still
10:48 have the Bitcoin. I could buy I could
10:49 sell the Bitcoin and buy a Tesla right
10:51 now. Um, but instead of doing that, I
10:53 went to Trustmark and I took out an auto
10:55 loan at 6% interest for 5 years. Uh, and
10:59 I paid for the Tesla that way and now I
11:01 pay uh Trustmark back with a with a
11:04 monthly car payment. Now, the only
11:05 reason I do did that is because one, I
11:07 can pay that car payment all day long. I
11:09 could pay off the car today in a
11:11 heartbeat with, you know, relatively
11:13 little impact on my net worth if I
11:14 needed to do that for any reason. I just
11:16 didn’t want to do that because at 85,000
11:19 a coin, Bitcoin had been up to 109,000
11:22 and it was down at 85. So, just like
11:24 borrowing against home equity line of
11:26 credit or a 401k, um, I’m thinking I
11:29 don’t want to sell Bitcoin down here at
11:31 85,000, especially when it’s tasted 109.
11:34 I don’t want to buy sell it down here at
11:37 uh at 85,000. So, I will borrow US
11:40 dollars to buy the Bitcoin uh sorry to
11:42 buy the Tesla and keep my Bitcoin and
11:44 then I will pay off the Tesla slowly
11:47 month by month over 5 years at 6%
11:49 interest. Well, that is working
11:50 fantastically well because my car
11:52 payment is coming up. What is it’s the
11:54 14th of the month? My car payment is
11:56 coming up and I’m about to pay uh a car
11:59 payment that is like whatever 30%
12:01 discounted or whatever it is. I’m paying
12:03 with $120,000 Bitcoin for a car payment
12:06 that was established when Bitcoin was
12:08 85. So, whatever percent less $85,000 is
12:11 than $120,000, that’s a significant
12:14 discount on my car payment. Uh, and
12:16 hopefully I’ll get to the point where
12:17 I’m paying like half where, you know,
12:19 Bitcoin’s double $85,000 and my car
12:22 payments are less than half of what they
12:23 would have been if I had just paid up
12:25 front. So, I am much more open to
12:28 financing a house or a car so that you
12:31 don’t have to sell Bitcoin. But that
12:34 that assumes you already have the
12:35 Bitcoin and you are financing a new
12:38 purchase of a house or a car or a used
12:40 house. Obviously, my house is used. Uh
12:42 or in my case, a new car, but I could
12:44 afford it. Otherwise, I would always
12:45 recommend a used car, not a new car. Um,
12:48 so I’m I’m way more open to that. That’s
12:50 not saying I recommend it. I’m just
12:51 saying I’m way more open to that if
12:53 somebody says, “I have my Bitcoin. I
12:55 could liquidate it and buy a car or I
12:57 could liquidate it for a 20 or 30% down
12:60 payment on a house, but I don’t want to.
13:02 Instead, what I’m going to do is
13:09 crud. I’ve got to go deal with a natural
13:12 gas leak.” Um, this video unfortunately
13:15 is going to be in two parts, which I
13:17 know is super inconvenient, but uh here
13:19 we go. It’s just going to be in two
13:21 parts. Sorry everyone.
