Playbook 04

Borrow Without Selling

Unlock liquidity without triggering a sale.

Level
Intermediate
Time
~20 min
Minimum
~$500 collateral
Risk
Medium–High (liquidation risk)

Use ADA or fGLD as collateral on Fluid, borrow USDM, and keep your exposure intact. The playbook for anyone who needs cash flow without giving up long-term conviction.

Prerequisites

Before you start, complete:

Why this playbook exists

Selling your ADA to pay for something feels bad for two reasons: first, you lose the upside if ADA appreciates; second, in most jurisdictions, selling triggers a taxable event. A collateralized loan solves both. You keep the asset, you get stablecoin liquidity, and — because a loan is not a disposal — there is typically no capital gains event.

This is one of the oldest strategies in traditional finance (the rich have been borrowing against stock portfolios for a century). DeFi makes it available without a private banker.

Disclaimer up front

This playbook is not tax advice. Tax treatment of crypto loans varies by jurisdiction. Talk to a professional before relying on tax efficiency as a reason.

What you'll need

  • Collateral: ADA, fGLD, or other supported markets on Fluid (WMTX, SNEK, NIGHT, IAG, Strike, FLDT)
  • Minimum: around $500 of collateral value is a sensible floor — below that, liquidation buffer is too tight
  • A clear use for the borrowed USDM (see “Good reasons to borrow” below)
  • Comfort with monitoring your loan health — this is not a “set and forget” strategy

How Fluid's borrowing works

Fluid is the Coalition’s lending partner on Cardano. The mechanics in plain language:

  1. Deposit collateral. You supply ADA, fGLD, or another supported token to Fluid.
  2. Borrow USDM. You can borrow up to a percentage of your collateral’s value. Each market has its own loan-to-value (LTV) limit.
  3. Pay variable interest. Interest accrues while your loan is open. Current expected APYs sit in a 4–8% range for supply; borrow rates are higher and vary by market and utilization.
  4. Repay to unlock. When you repay borrowed USDM (plus interest), your collateral is released. You can repay partially or in full, any time.

LTV and liquidation — the part that matters

If your collateral’s value drops (or your debt grows through interest), your loan health deteriorates. If it crosses the liquidation threshold, your position gets liquidated — collateral is sold to repay the loan, and you take a loss.

For fGLD markets specifically, Fluid has implemented a partial liquidation model at ~90% LTV: you lose around 10% of your collateral at liquidation, not 100%. This is a meaningful protection vs. full-liquidation models found elsewhere.

Other markets may use different LTV rules. Always check the live parameters in the Fluid app before opening a position.

Good reasons to borrow — and bad ones

Good reasons ✓

  • Bridge financing. A tax bill, a down payment, a business expense. Borrow, use, repay when cash arrives.
  • Opportunistic reinvestment. Deploy borrowed USDM into a separate yield opportunity that clears the borrow rate with margin.
  • Tax-event avoidance. You’d have to sell $20K of ADA to cover something and don’t want to realize the gain. Borrow instead.
  • Concentration without selling. You believe strongly in ADA long-term and don’t want to reduce exposure, but you need liquidity now.

Bad reasons ✗

  • Leveraging up for speculation without a plan. If you don’t know what you’ll do when the collateral drops 30%, you don’t have a plan.
  • Borrowing because “rates are low right now.” Rates are variable. They can change.
  • Covering ongoing lifestyle costs. A loan with liquidation risk is a terrible replacement for income.

The strategy in five steps

1

Decide your collateral and amount.

ADA for pure crypto exposure; fGLD if you want your collateral to be real-world-asset-backed (more stable price = wider liquidation buffer). Decide the total USD value you want to deposit.

2

Decide your borrow amount — conservatively.

Just because you can borrow up to the LTV limit does not mean you should. A rough rule of thumb: borrow no more than half of what the protocol allows. If the market permits a 70% LTV, borrow at 35%. That doubles the price drop your position can survive before liquidation.

3

Open the position on Fluid.

Go to app.fluidtokens.com. Connect your wallet. Deposit collateral. Borrow USDM. Note your liquidation price.

4

Set up monitoring.

  • Write down your liquidation price. Put it in your calendar.
  • Set a price alert at 15–20% above liquidation (your “time to add collateral or repay” line).
  • Check your position weekly at minimum — more often in volatile markets.
5

Manage actively.

  • If collateral rises: you can borrow more, or do nothing.
  • If collateral falls toward the alert line: either add more collateral or repay part of the loan.
  • If you hit liquidation: you took too much risk. Review and size down next time.

Worked example (illustrative only)

You hold 10,000 ADA worth $6,000. You need $1,500 for a business expense but don’t want to sell.

  • Deposit 10,000 ADA as collateral on Fluid
  • Borrow 1,500 USDM (25% LTV — well below the protocol limit)
  • Use the USDM for your expense
  • Three months later, you have cash flow from the business. You repay 1,500 USDM + accrued interest.
  • Your 10,000 ADA comes back to you, intact. No sale. No taxable event (in most jurisdictions).

If ADA drops 30% during those three months, your 25% LTV position is still healthy — you sized with margin.

What to do next

Risks & Disclosures

Liquidation risk.
If collateral drops or debt grows enough, you lose collateral. Partial liquidation for fGLD is a softer landing, but it is still a loss.
Interest rate risk.
Borrow APYs are variable. A sustained rise in rates increases your cost to carry.
Smart contract risk.
Fluid is audited, but all DeFi carries non-zero smart contract risk. Don't deposit more than you can afford to lose to a black-swan protocol failure.
Oracle risk.
Your collateral value on-chain depends on oracle pricing. In extreme dislocations, oracles can briefly lag spot and trigger liquidations.
Tax treatment varies.
"Loans aren't taxable events" is generally true in most jurisdictions, but not universally. Talk to a tax professional.
Key management.
You still need secure self-custody. A compromised wallet loses both collateral and any borrowed funds still held.

Full risk disclosures at /risks.

Glossary References

See the Coalition Glossary for: Collateral, LTV, Liquidation, APY, Fluid, fGLD, Oracle, Smart contract, Taxable event.