Paying with crypto or borrowing against your crypto
- Direct payment via a crypto card
With a crypto card, you pay for purchases using your cryptocurrencies. At the moment of payment, the platform automatically converts a portion of your crypto into euros.
This is convenient and fast for everyday purchases. However, you are selling your crypto at the time of payment; if its value increases afterward, you will not benefit from that gain on the amount spent.
- Crypto-backed loans: understanding LTV
The LTV (Loan-to-Value) ratio compares the amount borrowed to the value of the crypto assets deposited as collateral.
For example, with an LTV of 50%, depositing the equivalent of €1,000 in Bitcoin might allow you to borrow €500. You keep your crypto as collateral instead of selling it, but it remains exposed to risks: its value could drop, and depending on the loan terms, this could trigger a request for additional collateral or lead to liquidation.
- What is the difference?
With direct payment, you sell a portion of your crypto to cover your purchases. With an LTV-based loan, you use your crypto as collateral to borrow funds.
A crypto card may be suitable for routine expenses. A crypto-backed loan can provide access to liquidity without an immediate sale, but it requires a clear understanding of the associated fees, terms, and risks. Neither option is inherently better; it all depends on your personal situation and your risk tolerance.
- A life lesson: making an informed choice
Ease of use does not always equate to the best choice. Before spending or borrowing, take the time to understand what you are giving up, what risks you are taking, and what you will be required to repay. In finance, as in life, a well-considered decision is often better than one made in haste.
- Personal development: making better financial decisions
To make progress, adopt a few simple habits: set your goals, compare your options, and avoid acting out of a fear of missing out. Understanding risks is just as important as seeking gains. The more calmly and methodically you make your decisions, the more your confidence and autonomy will grow.