The Bitcoin Retirees’ Dilemma: Sell Or Borrow?

How to manage your bitcoins at retirement? Is it better to simply sell your bitcoins, or to use them as collateral and live on credit?

Bitcoin, the Capital of the 21st Century

In a thread published on X dedicated to bitcoin, user Wicked compared the two approaches in light of a pessimistic 10-year scenario. The parameters are as follows:

A retiree who saved in bitcoins the equivalent of 50 times their annual expenses. Annual expenses amount to €50,000 for a total savings of €2,500,000 in bitcoins (24 BTC).

Years 1 and 2: Sharp bear market. Bitcoin drops 50% by the end of the first year and another 50% by the end of the second year. In other words, the value of their bitcoins falls to €1,250,000 after one year and to €625,000 after two years.

As a result, the annual expense of €50,000 represents 2% of the initial reserve (year 1), then 4% (year 2) and 8% (year 3).

Years 3 and 4: Recovery. The bitcoin market rebounds, rising 100% per year. The bitcoin price returns to the initial level by the end of year 5.

Years 5 to 10: Appreciation of 25% per year in bitcoin (Michael Saylor’s forecast).

Which of the two strategies is more profitable after ten years? Selling part of the bitcoins each year to cover expenses, or borrowing against those BTC which are kept? Knowing that the annual interest rate is painful, at 10%.

Here is a detailed analysis of the two approaches.

Strategy 1: Selling Bitcoins

In this approach, the retiree sells each year, at the beginning of the year, the amount of bitcoin necessary to cover their annual expenses of €50,000.

Wicked makes the simplifying assumption that bitcoins are not taxed. This is the case in several European countries like Portugal, Germany, and the Czech Republic where capital gains tax is not applied if bitcoins are held for more than one year.

Here’s how cost of living and bitcoin reserves evolve over 10 years:

Year 1: The retiree sells 2% of their BTC, leaving 98%.
Year 2: The retiree sells 4% of their BTC, leaving 94%.
Year 3: 8% sold, 86% left.
Year 4: 4% sold, 82% left.
Year 5: 2% sold, 80% left.
Year 6: 1.6% sold, 78.4% left.
Year 7: 1.3% sold, 77.1% left.
Year 8: 1% sold, 76.1% left.
Year 9: 0.82% sold, 75.3% left.
Year 10: 0.66% sold, 74.6% left.

Result after 10 years: The retiree keeps 74.6% of their initial reserve, which (thanks to quick AI calculations!) is equivalent to €7,115,314 considering the bitcoin drop followed by appreciation imagined in the scenario.

Strategy 2: Borrowing

In this scenario, the retiree borrows each year to cover expenses. They use their bitcoin reserve as collateral. Bitcoins are never sold. Assumptions are as follows:

Collateral requirement: 2x. In other words, to borrow the equivalent of 1% of the reserve value in euros, 2% of BTC must be locked as collateral.

Terms: 10% interest accumulates year after year. The retiree continually rolls over the debt without ever repaying anything.

Here’s how the debt and collateral evolve over 10 years:

Year 1: Cost = 2%. Borrowing 2%, initial debt = 2% × 1.1 = 2.2% (interest). Collateral = 4.4% of total savings. At year-end, with bitcoin dropping 50%, adjusted debt is 4.4%, collateral = 8.8%.

Year 2: Cost = 4%. Previous debt = 4.4% (prior year) + 4% (new loan) × 1.1 = 8.8%. Collateral = 17.6%. At year-end, with another 50% bitcoin drop, debt = 17.6%, collateral = 35.2%.

Year 3: Cost = 8%. Debt = 17.6% + 8% × 1.1 = 26.4%, collateral = 52.8%! At year-end, bitcoin rises 100%, debt = 13.2%, collateral = 26.4%.

Etc.

Result after 10 years: The retiree keeps 100% of their initial reserve valued then at €9,537,322, from which €885,846 of debt related to interest must be deducted.

Conclusion

Financial results after 10 years:

Scenario 1 (sell) : €7,115,314.
Risk of liquidation: None, since there is no borrowing.

Scenario 2 (borrow) : €8,651,477.
Risk of liquidation: High, especially at the beginning of year 3, where the [debt/total savings] ratio reaches 50%! Another 50% bitcoin drop would trigger a liquidation, causing a 50% loss of all bitcoins.

As you can see, even with an extremely conservative starting point (only 2% of savings in BTC spent each year), three consecutive years of 50% drops in bitcoin trigger a liquidation and the loss of half of the initial 24 bitcoins.

That is, for example, if bitcoin fell from €104,000 to €13,000. This seems unlikely now that bitcoin is endorsed by the United States and many large financial institutions. Here, the US Vice President is actively supporting bitcoin:

Finally, the risk of liquidation is greatly reduced if you are not retired and continue working. For example, if you want to buy a house.

It is expected that this type of “lombard loan” will become more common in France over the coming years. They already exist in the United States with the launch of the company 21 Capital headed by Jack Mallers. It is already possible to take out loans with rates between 9 and 13%.

To convince you to plan your retirement in bitcoins, don’t miss our article: The Interest on French Debt is Exploding.

Nicolas T.

Bitcoin, geopolitical, economic and energy journalist.