Stress-Test Your Bitcoin Loan: The Drawdown Scenarios Every Borrower Should Run First
Before you borrow a dollar against your Bitcoin, spend five minutes doing the math a bank would do for you. Here's the exact exercise — with the numbers worked out.
A bank underwrites a loan conservatively so that a bad year doesn't sink you. When you borrow against your own Bitcoin on a self-custodial protocol, that conservatism becomes your job — and the good news is it's a five-minute exercise you do once, up front. This is that exercise, worked all the way through.
The setup
On Money Protocol, you deposit RBTC (Bitcoin on the Rootstock network) into a vault — a smart-contract position only you control — and mint BPD, a dollar-pegged stablecoin, against it at 0% interest. No monthly payment, no credit check, one flat borrowing fee.
The number that governs your safety is the collateral ratio: the dollar value of your RBTC divided by the BPD you owe. The liquidation floor is 110% — drop below it and the vault is closed to clear the debt. Stress-testing is simply asking, in advance: how far can Bitcoin fall before I get anywhere near that floor?
Run the scenarios
Say you deposit $30,000 of RBTC and mint 12,000 BPD. Opening ratio: 250%. Now punch Bitcoin down through the drawdowns it has repeatedly delivered:
| BTC falls by | Your collateral is worth | Your ratio becomes |
|---|---|---|
| 0% | $30,000 | 250% |
| 20% | $24,000 | 200% |
| 35% | $19,500 | ~163% |
| 50% | $15,000 | 125% |
| 56% | $13,200 | 110% (liquidation) |
The lesson jumps off the table: at a 250% start, even a 50% crash leaves you at 125% — bruised, not liquidated — and it takes a 56% collapse to actually breach the floor.
Now compare a borrower who opened at a thin 130% to grab maximum cash. For them, a routine ~15% dip — a Tuesday in Bitcoin — is a liquidation event. Same protocol, same asset, wildly different outcome. The opening ratio you pick is the whole ballgame.
Turn the numbers into a plan
Once you've run the table, convert it into three price levels for your vault and write them down:
- Green (≥200%): do nothing.
- Amber (150–200%): get your spare RBTC or repayment BPD ready.
- Red (<150%): act — add collateral or repay debt. Two minutes, both levers in your control.
Set a price alert at your amber level, not your liquidation level, so the warning arrives with room to spare. And keep 15–20% of your minted BPD in reserve — that reserve is a one-click repayment if your ratio ever slips, instead of a frantic hunt for dollars mid-crash.
One more line to respect
There's a system-wide 150% Recovery Mode threshold that can kick in during market-wide crashes, when the protocol may liquidate vaults under 150% (not just under 110%) to protect itself. Translation: on the worst days, treat 150% as your real line, not 110%. A vault you stress-tested and opened conservatively sails through it untouched.
Why the work is worth it
The alternative to doing your own five minutes of math is handing your Bitcoin to a custodian who does it for you — and who also lends your coins out and can freeze your account when things get rough, exactly as the 2022 CeFi lenders did. Stress-testing your own vault is the price of never having a counterparty between you and your Bitcoin.
Do the table before you borrow, not after. You can borrow against Bitcoin at 0% interest once your numbers check out, and the full mechanics live at docs.moneyprotocol.co.
Educational only; not financial advice.
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