Using a Margin Loan to Buy Bitcoin: Risk & Break-Even Calculator
A brokerage margin loan lets you borrow against your existing stock and bond portfolio to purchase Bitcoin. This means you do not need to sell your investments to fund a Bitcoin position — you keep your portfolio intact and add Bitcoin exposure on top. For investors with large taxable brokerage accounts, this avoids triggering capital gains taxes from liquidating positions.
The trade-off is margin call risk. If your portfolio value drops below the maintenance threshold, your broker can force-sell your securities to cover the loan — potentially at the worst possible time. This page covers how margin loans work for Bitcoin accumulation, the break-even CAGR math, and the specific risks involved. Model your own numbers with the SaylorScope calculator.
How Margin Loans Work for Bitcoin Purchase
When you open a margin account at a brokerage, you gain the ability to borrow against your holdings. Reg T allows borrowing up to 50% of your portfolio value for initial purchases. Maintenance margin requirements (typically 25-30%) determine the floor before a margin call is triggered. For example, with a $500,000 stock portfolio, you could borrow up to $250,000 initially.
The borrowed cash can be withdrawn and sent to a crypto exchange to buy Bitcoin, or used to purchase Bitcoin ETF shares directly in the brokerage account. The loan has no set repayment schedule — interest accrues daily and you can repay at any time. This flexibility is a significant advantage over term loans.
Interest rates vary dramatically by broker and balance. Interactive Brokers charges as little as 5.3% on large balances, while discount brokers may charge 10-13% on smaller ones. For this strategy to work, you need a competitive rate — and that typically means a six-figure portfolio or a broker that specializes in low margin rates.
Break-Even CAGR Table: Margin Loan at Various Rates
No closing costs for margin loans, so effective cost equals the stated rate. However, you must account for the risk premium of potential forced liquidation.
| Margin Rate | BTC CAGR Needed (5yr) | BTC CAGR Needed (10yr) | Break-Even at 30% CAGR |
|---|---|---|---|
| 5.5% | ~16% | ~10% | ~1.9 years |
| 7.0% | ~19% | ~12% | ~2.3 years |
| 9.0% | ~23% | ~15% | ~3.0 years |
| 11.0% | ~27% | ~18% | ~3.5 years |
| 13.0% | ~30% | ~20% | ~4.2 years |
Does not account for potential tax deduction of margin interest. With the deduction, effective rate may be 20-30% lower for high-income investors.
Pros and Cons
Advantages
- +No home at risk — your stock portfolio is the collateral
- +Instant access to funds — no appraisal or underwriting
- +No fixed repayment schedule — repay whenever you choose
- +Interest may be tax-deductible as investment interest expense
- +Avoids capital gains from selling stocks to buy Bitcoin
Risks
- -Margin calls can force liquidation of your stocks at the worst time
- -Variable rate — cost can increase with rising interest rates
- -High rates at smaller brokerages (11-13% for sub-$100k balances)
- -Correlated risk: stocks and Bitcoin can drop simultaneously
- -Interest compounds daily, adding up faster than monthly payment products
Risk Analysis: The Margin Call Scenario
The unique risk of a margin loan is forced liquidation. Consider a $500,000 stock portfolio with a $150,000 margin loan (30% LTV). If your portfolio drops to $375,000, your loan represents 40% LTV — still above most maintenance thresholds. But if stocks fall to $250,000, your loan is 60% LTV, which triggers a margin call requiring you to deposit cash or sell $100,000+ in securities.
Scenario: 30% stock market decline + 50% Bitcoin decline
Portfolio: $500,000 becomes $350,000. Bitcoin: $150,000 position becomes $75,000.
Margin loan: still $150,000 + accrued interest. LTV: 43% — approaching margin call territory.
If you are forced to sell $50,000 in stocks to meet the call, you lock in losses and reduce your portfolio's recovery potential.
Key insight: The margin call is triggered by stock declines, but your Bitcoin position is a separate, unrelated bet. You can face forced stock sales due to market stress even if Bitcoin is performing well.
Frequently Asked Questions
Can I use a margin loan from my brokerage to buy Bitcoin?
Most traditional brokerages (Schwab, Fidelity, Interactive Brokers) allow margin loans against your stock and bond portfolio, but they generally will not let you buy cryptocurrency directly on margin. However, you can take the margin loan proceeds and transfer the cash to a crypto exchange or buy Bitcoin ETFs on margin (where available). Interactive Brokers, for example, does allow margin on certain crypto products. Check your specific brokerage policies.
What is the margin call risk when using a margin loan for Bitcoin?
A margin call occurs when the value of your collateral (your stock portfolio) drops below the maintenance margin requirement, typically 25-30% of the loan value. If your stocks decline, you must either deposit more cash, sell securities, or repay part of the loan immediately. Critically, the margin call is triggered by your stock portfolio declining, not by Bitcoin dropping. However, if both your stocks and Bitcoin fall simultaneously (as often happens in broad market sell-offs), you face a double hit.
What interest rates do margin loans charge?
Margin loan rates vary significantly by broker and loan size. Interactive Brokers offers rates as low as 5.3% for large balances, while Schwab and Fidelity charge 11-13% for smaller balances. The rate is typically variable, tied to the broker call rate or SOFR. Larger loan balances generally qualify for lower rates. At $100,000+, many brokers offer rates in the 5-8% range.
Are there tax advantages to using a margin loan for Bitcoin?
Margin loan interest may be deductible as investment interest expense, which can offset investment income (interest, short-term capital gains, and optionally dividends). The deduction is limited to your net investment income for the year, with any excess carried forward. This can meaningfully reduce the effective cost of the margin loan. However, you cannot deduct the interest against ordinary income. Consult a tax professional for your specific situation.
How does a margin loan compare to a HELOC for buying Bitcoin?
A margin loan is faster to access (no appraisal, often instant) and does not put your home at risk. However, margin loans carry margin call risk, which can force you to sell assets at the worst time. HELOC rates are generally lower and there are no margin calls, but your home is collateral. For someone with a large stock portfolio and modest home equity, a margin loan may be the better structural fit. For homeowners with significant equity but smaller portfolios, a HELOC is typically more advantageous.
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Disclaimer: This content is for informational and educational purposes only. It is not financial, investment, tax, or legal advice. Margin loans carry significant risk including potential forced liquidation of your portfolio. Always consult a qualified financial advisor before making leverage decisions. Past performance does not guarantee future results.