Bitcoin-Backed Loans Explained: Borrow Cash Without Selling Your BTC

Learn how Bitcoin holders can get cash by using their BTC as collateral — keeping their coins while avoiding a taxable sale.

Imagine you own Bitcoin but suddenly need cash — for a house deposit, a business, or a tax bill. Selling your Bitcoin means losing out if its price rises later, and in many countries it also triggers a tax. A Bitcoin-backed loan offers a way around both problems.

What is it? A Bitcoin-backed loan is a type of secured loan (a loan backed by something valuable you own, called collateral). You pledge your Bitcoin as that collateral, and in return a lender gives you real money — either regular dollars or a stablecoin (a digital coin whose value is tied to the U.S. dollar, like USDC). While the loan is open, your Bitcoin stays locked. Repay what you borrowed plus interest, and you get your coins back.

How much can you borrow? This depends on the loan-to-value (LTV) ratio — how much you borrow compared to your Bitcoin's worth:

LTVs typically range from 30% to 70%
At 50% LTV, $100,000 of Bitcoin gets you a $50,000 loan
Published interest rates run from about 5.8% to 14%

The main risks come from Bitcoin's wild price swings:

Margin call: If Bitcoin's price drops, you may be asked to add more collateral or repay part of the loan.
Liquidation: If the price keeps falling, the lender sells your Bitcoin to cover the debt.

Who offers these loans? There are two main types:

Centralized (CeFi): Companies like Ledn, Nexo, and Coinbase hold your Bitcoin after an identity check.
Decentralized (DeFi): Automated programs called smart contracts hold your collateral instead of a company.

The market crashed in 2022 when big lenders like Celsius and BlockFi went bankrupt. Since then it has recovered more cautiously. In early 2026, Ledn completed a $188 million deal that earned the first-ever investment-grade rating for Bitcoin-backed lending, and Coinbase passed $1 billion in loans. Total crypto-backed loans hit $56 billion in Q2 2026.

Bottom line: Bitcoin-backed loans let you unlock cash without selling your coins — but the risk of losing your Bitcoin if prices fall is real. Always understand the terms before borrowing.

This is an AI-generated summary. Read the original article at: https://decrypt.co/resources/what-is-a-bitcoin-backed-loan-borrowing-against-btc-explained