Buy, Borrow, Die Strategy Explained: A Tax-Efficient Way to Use Capital

Key Takeaways on Buy, Borrow, Die Strategy

• The core concept is simple. You purchase assets that appreciate over time, borrow against them instead of selling, and hold them until death (or indefinitely in the crypto world) to avoid capital gains taxes.
• Crypto lending platforms make this accessible. You no longer need to be a billionaire to use this strategy. CoinRabbit allows anyone with crypto holdings to borrow against their assets without credit checks or complex paperwork.
• Tax efficiency drives the strategy. When you sell an asset, you trigger a taxable event. When you borrow against it, you do not. This distinction forms the foundation of the entire “Buy, borrow, die” strategy.
• Risk management matters. Loans require collateral, and if your asset value drops too far, you face liquidation. Smart investors maintain healthy loan-to-value ratios and monitor their positions.

What Is the Buy Borrow Die Strategy?

What is the “Buy, borrow, die” strategy in practical terms? The name describes exactly how it works. You buy assets that grow in value. You borrow money against those assets when you need cash. You hold the assets until you pass them to your heirs (or in the crypto context, you simply never sell). 

Professor Edward McCaffery at the University of Southern California coined this term in the mid-1990s. He wanted to help law students understand how wealthy families preserve their fortunes across generations. The strategy exploits two key features of most tax systems: unrealized gains are not taxed, and loan proceeds are not considered income.

Imagine you purchased Bitcoin at $10,000 per coin. Today, that same Bitcoin trades at $100,000. If you sell, you owe capital gains tax on the $90,000 profit. Depending on your jurisdiction and income level, that tax bill could eat up 20% to 40% of your gains.

But what if you need money and do not want to sell? You can borrow against your Bitcoin. A crypto lending platform might offer you a loan worth 50% of your Bitcoin’s value. You receive $50,000 in cash or stablecoins. You still own your Bitcoin. No sale occurred, so no tax event happened.

Your Bitcoin continues to appreciate while you use the borrowed funds for investments, business expenses, or daily life. When the loan comes due, you can repay it, refinance it, or borrow more against your now-larger position.

The traditional version of this strategy relies on the “step-up in basis” rule that exists in many countries. When someone dies, their heirs receive assets at current market value rather than the original purchase price. All those years of appreciation? The tax slate gets wiped clean.

Crypto investors have adapted this framework with a twist. Instead of waiting for death, they focus on indefinite holding and strategic borrowing. The goal remains the same: never sell the appreciating asset.

How Does Buy, Borrow, Die Actually Work with Crypto?

The “Buy, borrow, die” strategy explained through a crypto lens looks slightly different from the traditional real estate or stock market version. Digital assets offer unique advantages, including 24/7 markets, instant loan processing, and global accessibility. Here is the step-by-step breakdown of how crypto investors execute this strategy:

Step 1: Acquire appreciating crypto assets

The foundation of the strategy requires assets that grow in value over time. Bitcoin remains the most popular choice due to its historical performance and wide acceptance as loan collateral. Ethereum also qualifies. Some platforms accept other major cryptocurrencies.

The key is to buy and hold. DCA crypto (dollar-cost averaging) works well here. You accumulate your position over months or years without worrying about short-term price swings.

Step 2: Watch your assets appreciated

This step requires patience. Crypto markets are volatile in the short term but have shown strong long-term growth patterns. Bitcoin, for example, has delivered compound annual returns that outpace most traditional assets over any rolling four-year period.

During this phase, you do nothing. Your crypto sits in cold storage or on a trusted platform. No trades mean no taxable events.

Step 3: Borrow against your holdings when you need liquidity

Life happens. You might want to buy a house, fund a business, or cover unexpected expenses. Traditional finance would tell you to sell some crypto and pay the taxes. The “Buy, borrow, die” approach says otherwise.

You deposit your crypto as collateral on a lending platform. The platform gives you a loan in stablecoins or fiat currency. Common loan-to-value ratios range from 20% to 90%, depending on the platform and your risk tolerance.

For example, if you deposit $100,000 worth of Bitcoin and borrow at a 50% LTV, you receive $50,000 in loan proceeds. Your Bitcoin remains yours. You pay interest on the loan, but you owe no taxes because no sale occurred.

Step 4: Use the borrowed funds strategically

Smart investors do not borrow just to spend on consumption. They often reinvest the loan proceeds into more appreciating assets. This creates a leverage effect that can accelerate wealth growth.

Others use borrowed funds for business investments, real estate purchases, or other opportunities that generate returns higher than the loan interest rate. If your loan costs 8% annually but your investment returns 15%, the math works in your favor.

Step 5: Manage the loan over time

Crypto-backed loans require active management. If your collateral drops in value, your loan-to-value ratio increases. Most platforms will liquidate your collateral if the LTV exceeds a certain threshold.

You have several options to manage this risk. You can add more collateral when prices drop. You can repay part of the loan to reduce your LTV. You can set up monitoring alerts to stay informed about market movements.

Step 6: Refinance or repay as needed

Unlike traditional mortgages with fixed terms, many crypto loans offer flexible repayment. You can pay interest only for extended periods. You can repay the principal whenever you want. You can refinance if you find better rates. The goal is to keep the loan active as long as possible without triggering a sale of your underlying assets.

Practical example: Sarah bought 2 BTC at $30,000 each in 2022. Her total investment was $60,000. By 2025, Bitcoin trades at $100,000, so her holdings are worth $200,000. If Sarah sells, she owes capital gains tax on $140,000 in profits.

Instead, Sarah uses the “Buy, borrow, die” strategy. She deposits her 2 BTC as collateral and borrows $80,000 at a 40% LTV. She uses this money to invest in a rental property. The rental income covers her loan interest payments. Her Bitcoin continues to appreciate. She pays no capital gains tax. Two years later, her Bitcoin has grown to $300,000. Her loan balance (with accrued interest) sits at $90,000. Her net equity has grown substantially, all without triggering a taxable sale.

Why Do Crypto Whales Use This Strategy?

Large cryptocurrency holders face a particular challenge. They often hold hundreds of millions in unrealized gains. Selling even a fraction of their position would create enormous tax bills and potentially move the market against them. The “Buy, borrow, die” approach solves multiple problems simultaneously:

🧊 Capital preservation remains the top priority. Whales understand that their crypto positions represent asymmetric upside potential. Bitcoin could reach $500,000 or $1,000,000 in the coming decades. Selling now means giving up that future appreciation forever. Borrowing allows them to access liquidity while they maintain exposure to potential gains.

🧊 Tax optimization becomes possible at scale. A whale with $100 million in unrealized gains might face a $20 million or larger tax bill upon sale. By borrowing instead of selling, they defer that tax liability indefinitely. The interest payments on a loan are often far less than the tax savings from not selling.

🧊 Liquidity access does not require asset sales. Whales often need capital for new investments, business operations, or personal expenses. Crypto lending platforms can process loans worth millions of dollars without the whale giving up ownership of a single satoshi.

🧊 Portfolio concentration stays intact. Many wealthy crypto holders built their fortunes by concentrating their investments in Bitcoin or a few select assets. Diversification sounds nice in theory, but concentration built their wealth. Borrowing allows them to fund other investments without reducing their core positions.

🧊 Estate planning benefits extend to heirs. In jurisdictions with step-up basis rules, heirs receive assets at current market value. A whale who holds until death passes on crypto without the embedded tax liability. The next generation starts fresh.

🧊 Market timing becomes irrelevant. Nobody can predict short-term price movements reliably. By committing to a long-term hold strategy with borrowing for liquidity needs, whales remove the temptation to sell at inopportune moments.

One prominent example involves early Bitcoin miners. Many accumulated thousands of coins when Bitcoin cost less than a dollar. Selling now would trigger catastrophic tax bills. Instead, they borrow against small portions of their holdings to fund their lifestyles. Their core positions remain intact, compounding in value year after year.

Tips for Maximizing Returns While Managing Risk

The “Buy, borrow, die” strategy explained above sounds attractive, but execution matters. Here are practical recommendations to help you succeed:

• Maintain conservative loan-to-value ratios. 

The lower your LTV, the more room you have for price declines before liquidation. Most experts recommend borrowing no more than 50% to 80% of your collateral value. Yes, you could borrow more, but the risk increases dramatically.

• Monitor your positions actively. 

Set up price alerts. Check your loan status regularly. Crypto markets move fast, and a 30% drop can happen in days. Stay informed so you can add collateral or repay debt before liquidation triggers.

• Keep reserves for margin calls. 

Have stablecoins or fiat currency available to add collateral during market downturns. This buffer can save you from forced liquidation at the worst possible time.

• Consider the tax implications of interest payments.

In some jurisdictions, interest paid on investment loans is tax-deductible. Consult with a tax professional to understand how loan interest affects your overall tax situation.

• Plan for multiple scenarios.

What happens if crypto prices drop 50%? 70%? How will you respond? Having a plan in advance prevents panic decisions. Document your response strategy before you need it.

• Use only established, reputable lending platforms.

The crypto space has seen numerous lending platform failures. Choose services with strong track records, adequate reserves, and transparent operations. CoinRabbit, for example, has built a reputation for reliability and user-friendly service.

• Start small and scale gradually. 

If you are new to crypto borrowing, begin with a small loan to learn the mechanics. Once you understand how everything works, you can increase your position size.

• Document everything for tax purposes.

Keep records of all loans, interest payments, collateral deposits, and withdrawals. Even though borrowing does not trigger immediate taxes, you may need this documentation for future tax planning or disputes.

CoinRabbit: Choosing the Right Crypto Lending Service

When you implement the “Buy, borrow, die” strategy, your choice of lending platform matters enormously. CoinRabbit has become a popular option for investors who want extra simplicity and top-tier security.

☑️ Fast and simple borrowing. Deposit your crypto as collateral and receive funds within 10 minutes. No complicated setup, no credit checks, and no lengthy verification process. Traditional banks scrutinize your credit history and financial statements for weeks.

☑️ Over 300 supported cryptocurrencies. Use BTC, ETH, SOL, and hundreds of other popular altcoins as collateral for your loans. This flexibility allows you to borrow against whatever assets you hold without the need to sell and convert first

☑️ No rehypothecation. CoinRabbit never lends out your collateral to third parties. Your crypto is never used for trades or high-risk activities.

☑️ Cold storage protection. Your assets stay in secure cold wallets with multisignature controls. This approach keeps your crypto safe from online threats and unauthorized access.

☑️ Full ownership of assets. Your crypto always remains yours. After you repay the loan, you get back 100% of your collateral, plus any increase in its value. If Bitcoin doubles while your loan is active, that gain belongs to you.

☑️ 24/7 support. A dedicated support manager is available around the clock to assist with your assets or answer any questions about the platform.

Final Thoughts on the Buy, Borrow, Die Strategy

The “Buy, borrow, die” approach represents a fundamental shift in how investors think about wealth. Instead of the traditional cycle of buy, sell, pay taxes, and repeat, this strategy keeps your assets working for you indefinitely.

Crypto lending has made this strategy accessible to regular investors, not just billionaires. With platforms like CoinRabbit, anyone with cryptocurrency holdings can borrow against their assets without selling, without credit checks, and without complex paperwork.

The wealthiest families have used this approach for generations. Now it is your turn to apply these principles to your own portfolio.

Last Updated on December 29, 2025 by Dan Marsh