Module 15: Crypto in Your Personal Finances
Crypto and Major Life Decisions
Chapter 8 of 12 · about 4 minutes
8.1 Borrowing against bitcoin for a house
Node had a sizeable bitcoin holding and was thinking about buying a home. A crypto lender offered a loan against the bitcoin, with no need to sell and no immediate tax.
"It sounds perfect," said Node. "I keep my bitcoin and get my house."
"Until bitcoin falls 50%," said Hash. "Then the lender needs more collateral, or sells your bitcoin, possibly at the worst moment, while you still owe money on a house. Major life decisions and volatile assets need careful thought."
8.2 Buying a home
| Approach | Considerations |
|---|---|
| Selling crypto for the deposit, well in advance | Removes volatility from the deposit; may trigger tax (Module 14); follows the time horizon rule (Chapter 3) |
| Keeping the deposit in crypto until purchase | High risk of a crash delaying the purchase |
| Borrowing against crypto (crypto-backed loan) | Avoids selling, but adds liquidation risk and interest (Module 9, Chapter 6) |
| Crypto-backed mortgages from specialised lenders | Terms vary widely; read carefully; check whether collateral is rehypothecated, meaning re-lent by the lender |
A worked risk example. Node borrows $100,000 against bitcoin worth $250,000, a 40% loan-to-value ratio. The lender liquidates at 80% loan-to-value.
| BTC falls | Collateral value | Loan-to-value | Outcome |
|---|---|---|---|
| 0% | $250,000 | 40% | Safe |
| 30% | $175,000 | ~57% | Getting closer |
| 50% | $125,000 | 80% | Liquidation threshold reached |
A 50% fall, which Bitcoin has experienced several times (Module 1, Chapter 13), would trigger liquidation. Node would lose the bitcoin and still owe on the home.
Also consider custody risk: centralised crypto lenders have failed before (Module 16, Chapter 7), and some customers lost their collateral.
"So borrowing against volatile assets for a long-term commitment is a mismatch," said Node.
"It can be done carefully, with a low loan-to-value and spare collateral," said Hash. "But many people underestimate how quickly 50% drops happen."
8.3 Getting paid in crypto
Some people receive part of their salary or business income in crypto.
| Consideration | Why |
|---|---|
| Taxes | Income is usually taxed at its value when received (Module 14) |
| Volatility of living expenses | Bills are in local currency; a crash can leave you short |
| Concentration | Income, savings, and possibly employment all exposed to crypto (Chapter 1) |
| Practical approach | Convert enough to local currency or stablecoins for expenses and taxes; keep only a planned portion in volatile crypto |
8.4 Career decisions
People working in crypto often receive tokens as part of their compensation, sometimes with vesting schedules (Module 5, Chapter 5).
| Consideration | Why |
|---|---|
| Concentration | Job and wealth both depend on the same industry, sometimes the same project |
| Vesting and lockups | You may not be able to sell during downturns |
| Taxes | Tax may be due on vesting even if tokens can't be sold yet, depending on the country |
| Diversification | Consider selling a portion as tokens vest, according to a plan |
8.5 Retirement savings
Some countries offer tax-advantaged retirement accounts that can hold crypto-related investments, such as spot crypto ETFs (Module 10, Chapter 8), or occasionally crypto directly. Rules differ widely by country.
| Consideration | Why |
|---|---|
| Tax advantages | Gains may grow tax-deferred or tax-free in qualifying accounts |
| Allocation discipline | Retirement savings especially need sensible crypto allocations (Chapter 4) |
| Fees | ETF and account fees reduce returns over decades |
| Access | Retirement accounts may restrict withdrawals until a certain age |
| Glide path | Reduce volatile holdings as retirement approaches (Chapter 3) |
8.6 Relationships and shared finances
Crypto decisions often affect partners and family. Common sources of conflict include large losses that affect shared finances, secrecy about holdings or trading, and disagreements about risk.
| Practice | Why |
|---|---|
| Agree on how much shared money can be in crypto | Avoid surprises |
| Be open about holdings and activity | Trust, and practical for inheritance (Chapter 9) |
| Keep speculative activity within an agreed personal budget | Limits damage to shared goals |
| Explain risks honestly | Partners deserve to understand what's at stake |
Module 12, Chapter 12 listed hiding trading activity as a warning sign of compulsive behaviour.
8.7 Try it yourself
List any major life decisions you expect in the next five years: a home, career change, children, education, retirement. For each, write how your crypto holdings might affect it, and whether any money for that goal is currently exposed to crypto volatility. If you're considering borrowing against crypto, calculate the price fall that would trigger liquidation.
Key takeaways from this chapter
- Keep home deposits and other near-term goals out of volatile crypto well in advance.
- Borrowing against crypto avoids selling but adds liquidation, interest, and custody risk; a 50% fall can trigger liquidation at moderate loan-to-value ratios.
- If paid in crypto, convert enough for expenses and taxes, and watch concentration risk.
- Crypto industry workers face concentration in both job and wealth; diversify as tokens vest.
- Retirement accounts may hold crypto-related investments with tax advantages, but need sensible allocations and glide paths.
- Agree on crypto decisions with partners, be open, and keep speculation within agreed limits.