Most BTC borrowers make the same errors. Here are the five most costly ones I see, based on reviewing hundreds of loan structures.
1. Choosing by headline APR only
The advertised rate almost never matches the effective rate. Origination fees, custody fees, and other charges add 50–250bps on most platforms. Always calculate the effective APR before choosing. Our calculator does this automatically.
2. Ignoring rehypothecation policy
This is what killed Celsius. The platform lending your BTC to third parties to generate yield — and when those loans go bad, your collateral is gone. Every platform in our tracked dataset is scored on this. Choose platforms with explicit no-rehypothecation policies.
3. Borrowing at maximum LTV
90% LTV sounds great until BTC drops 5–15%. On ultra-high-LTV products, liquidation can come almost immediately. Even at a 50% starting LTV, many mainstream CeFi loans still liquidate after roughly a 37–45% BTC drop — not 50%. The lower LTV costs more in collateral efficiency but buys real safety. Read our LTV and liquidation guide for the full risk framework.
4. Not stress-testing the interest payment
At quote-only APR on a $200,000 loan, you pay $2,000/month in interest. At 10% on $500,000, that is $4,167/month. Make sure you can service the interest — in cash, not by borrowing more — for the full loan term, including if BTC drops and your collateral value falls.
5. Not reading the custody model
Most borrowers do not ask who holds their keys. That is the most important question. Multi-sig custody means the platform cannot access your BTC without you. Custodial platforms mean you are an unsecured creditor if things go wrong. Know which one you are choosing.
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