Bitcoin Exposure Simulator

Loan-to-value is the ratio between what you have borrowed and what your collateral is currently worth. Post 1 BTC worth $80,000, borrow $40,000 against it, and your LTV is 50%.

Two things about that number matter more than the number itself.

The first is that it moves on its own. The loan is denominated in dollars and stays where it is. The collateral is denominated in Bitcoin and does not. If Bitcoin falls 20%, that same $40,000 loan now sits against $64,000 of collateral, and the LTV has climbed to 62.5% without you having done anything.

The second is that every loan has two separate LTV figures, and they are easy to confuse. The initial LTV is the most you are allowed to borrow when you open the position. The liquidation LTV is the level at which the lender sells your collateral to close the loan. The distance between them is the entire margin of safety in the position.

Both are set by the platform, not by you. Initial caps for Bitcoin collateral commonly sit around 50%, though some venues allow more. Liquidation thresholds are typically somewhere in the 80-90% range, usually with a margin call before that point. These figures change, and they differ between products on the same platform - worth reading against your own lender rather than assuming.

Initial LTV caps for Bitcoin collateral commonly sit around 50%, though some venues allow more. At a 50% cap, 1 BTC worth $80,000 supports a loan of around $40,000. The cap is set by the lender, not by you.

The liquidation price is the Bitcoin price at which your current LTV reaches the liquidation threshold:

Liquidation price = loan amount ÷ (collateral in BTC × liquidation LTV)

Say you post 1 BTC as collateral when Bitcoin is at $80,000, and borrow $40,000 against it. That is a 50% LTV. Your lender liquidates at 85%.

For the LTV to reach 85%, your 1 BTC would need to be worth $47,059 - because $40,000 is 85% of $47,059. So that is your liquidation price, roughly 41% below where you opened.

Three consequences follow.

Borrowing less against the same collateral pushes the liquidation price down. Adding collateral without borrowing more does the same. Repaying part of the loan does it fastest, because it reduces the loan directly.

None of these are available to you after the fact unless you have kept something back to do them with. That is what makes a reserve a structural part of the position rather than an afterthought - it is the only thing that lets you move the liquidation price once it starts approaching.

A warning that your LTV has risen toward the liquidation threshold. You are given a window - sometimes hours, sometimes less in fast markets - to add collateral or repay part of the loan before the lender acts.

Three ways: add collateral without borrowing more, repay part of the loan, or borrow less in the first place. The first two require capital you have kept aside. Without a reserve, none of them are available when you need them.

It depends on the lender. Some sell only enough to restore a safe LTV; others close the entire position on a single breach. Either way the borrowed funds remain yours - what you lose is collateral, plus any liquidation fees and slippage.

A long futures position is not secured by Bitcoin you already own. It is backed by margin you post, and the position is closed when accumulated losses consume that margin.

In simplified terms, the position is liquidated after a price fall of roughly 1 ÷ leverage:

• 2x leverage - around a 50% fall
• 3x leverage - around 33%
• 5x leverage - around 20%
• 10x leverage - around 10%

Notice that this depends only on the leverage, not on how much capital you committed. Doubling the margin doubles the size of the position; it does not move the liquidation level a single dollar.

Real exchanges close positions slightly earlier than this, because a maintenance margin requirement sits above zero. Funding costs also erode margin over time on perpetual contracts, which pulls the liquidation level closer the longer a position stays open.

There is no universally safe figure, but the arithmetic is fixed: a position is liquidated after a price fall of roughly 1 ÷ leverage. At 2x that is a 50% move, at 10x it is 10%. The Framework approaches the question from the other end - rather than picking a leverage number and living with whatever liquidation level it implies, it starts from the drawdown the position has to survive and sizes backwards from there. That also makes the margin you post and the reserve you keep behind it two separate decisions rather than one.

Neither is simply riskier than the other. They are complementary tools serving a similar objective, with different risk, ownership and flexibility characteristics - and the more useful question is what each one is suited to.

Both liquidation prices are fixed the moment you open. Neither improves on its own as Bitcoin rises: what changes is the distance to them, which widens for both alike. What differs is everything around that.

What sets the depth of the cushion is not the same in each. On the loan it is the gap between the LTV you borrowed at and the threshold your lender liquidates at, so borrowing less genuinely buys you room. On futures it is leverage alone: posting more margin builds a larger position at the same distance from liquidation, and only cutting leverage moves that distance.

What a liquidation costs you also differs. When collateral is sold, the borrowed funds and whatever you bought with them remain yours - you lose the collateral and the fees. When futures margin is exhausted, the margin is gone entirely. And you usually see one coming: lenders issue a margin call with a window to respond, while a futures position closes automatically. Costs arrive differently too - interest accrues on the loan, while a perpetual futures position pays or receives funding depending on market conditions.

Ownership differs too. A loan is taken against Bitcoin you hold and continue to hold; the collateral stays yours unless it is sold. A futures position gives you exposure to the price without holding the coins at all - it expresses a view on Bitcoin rather than adding to what you own.

Read together, futures is the less forgiving instrument and lending the one more easily left unattended for too long. Which matters more is not a fixed answer: in the Framework these characteristics are scaled to the risk profile and to the phase of the cycle, with separate entry conditions, position sizes and safety rules for each tool - and its strategy section works through where each one belongs across a full cycle.

The figures here are illustrative and deliberately simplified. They ignore:

• interest on the loan, which raises LTV over time even if Bitcoin does not move
• funding rates on perpetual futures
• exchange and platform fees
• maintenance margin requirements, which close futures positions slightly earlier than the simplified calculation suggests
• slippage and price gaps during fast moves, which can result in liquidation at a worse price than the calculated level

In practice this means the real liquidation levels sit somewhat closer than the ones shown here, not further away. Treat these numbers as an upper bound on your margin of safety rather than a precise measurement.