How to Get a Bitcoin-Backed Loan Without Selling Your Stack
Bitcoin-backed loans let you access cash without triggering taxes. Here's how they work, which platforms to consider, and the risks you need to manage.
In April 2025, Coinbase expanded its Bitcoin-backed loan program to let users borrow up to $1 million in USDC against their holdings. It's the latest sign that borrowing against your Bitcoin—rather than selling it—has become a legitimate financial strategy, not just a crypto-native novelty.
The appeal is straightforward: you need cash, but you don't want to sell your BTC and trigger a taxable event. Maybe you're convinced the price is going higher. Maybe you've held for years and your cost basis makes selling painful. A Bitcoin-backed loan lets you access liquidity while keeping your position intact.
But this isn't free money. The 2022 collapse of Celsius and BlockFi showed what happens when these arrangements go wrong. Understanding how these loans actually work—and where the risks hide—matters more than chasing the lowest rate.
How Bitcoin-Backed Loans Work
The mechanics are simple. You deposit Bitcoin as collateral with a lending platform. They give you cash or stablecoins, typically up to 50% of your Bitcoin's value (this is your loan-to-value ratio, or LTV). You pay interest on the loan, and when you repay the principal, you get your Bitcoin back.
Most platforms don't have fixed repayment schedules. You can hold the loan as long as you want, paying only interest, then repay principal whenever you're ready. The collateral stays locked until you do.
The tax logic is what makes this attractive. Borrowing isn't a taxable event under current US rules. If you'd otherwise sell Bitcoin with significant gains, taking a loan instead defers that tax bill indefinitely—or at least until you actually sell.
The Major Platforms in 2026
The landscape has consolidated since the 2022 failures. Here's what the main options look like:
Coinbase Loans offers rates starting around 5% APR with LTV up to 86%, delivering USDC instantly. It's available in the US (excluding New York) and uses a DeFi backend through Morpho, with your BTC converted to cbBTC as collateral. The hybrid approach means lower rates but requires understanding that smart contracts carry their own risks.
Ledn charges 11.9% APR at 50% LTV, providing same-day funding in USD or USDC across more than 100 countries. They've positioned themselves as a safer option post-2022 by not rehypothecating customer assets.
Strike offers 9.5% APR and up at 50% LTV, available in select US states. It's a simpler product from a company known primarily for payments.
Unchained runs higher at 15.2% APR with 50% LTV, focusing on commercial borrowers in the US. Their multi-signature custody model gives borrowers more control over their collateral.
Rates have fallen significantly from the 15%+ that was common before 2022. Competition and the integration of DeFi protocols have pushed costs down, though you're still paying a premium over traditional secured lending.
The Risk You Can't Ignore: Liquidation
Here's where most people get into trouble. Your loan has an LTV ratio that changes every time Bitcoin's price moves. Borrow at 50% LTV, and a significant price drop pushes that ratio higher.
Most platforms issue margin calls around 70% LTV, giving you a window to add collateral or repay part of the loan. If you don't act and the ratio hits 80% or so, they'll liquidate your Bitcoin to cover the debt. You might get some back after fees, but you've now sold at the worst possible time—during a crash.
Do the math before borrowing. If you take a $50,000 loan against $100,000 in Bitcoin (50% LTV), a 37% price drop puts you at 80% LTV and potential liquidation. Bitcoin dropped more than 50% during 2022. It's not a theoretical risk.
Experienced borrowers recommend starting at conservative LTVs—50% or lower—specifically to create a buffer against volatility. Some keep extra capital available to add collateral during downturns.
Counterparty Risk: Lessons from 2022
Celsius, BlockFi, and Voyager all collapsed within months of each other in 2022. The common thread: they were rehypothecating customer deposits, lending out the same Bitcoin multiple times to generate yield. When the market turned, they couldn't meet obligations.
The industry responded by shifting toward proof-of-reserves and non-rehypothecating models. Platforms now compete on transparency and custody practices, not just rates. In January 2026, Galaxy Digital funded a $75 million collateralized loan obligation for Arch Lending, suggesting institutional confidence in the reformed market structure.
But counterparty risk hasn't disappeared. You're still trusting a company to custody your Bitcoin and return it when you repay. Read the terms. Understand whether your collateral can be used for other purposes. Check if there's insurance or third-party custody.
When This Makes Sense—and When It Doesn't
Bitcoin-backed loans work best for people with significant unrealized gains who need temporary liquidity. Funding a business expense, bridging a gap before other income arrives, or avoiding a tax hit in a high-income year—these are reasonable use cases.
Using borrowed funds to buy more Bitcoin is a different calculation entirely. You're adding leverage to an already volatile asset. If prices drop, you face liquidation precisely when your new Bitcoin is also underwater. This is how people get wiped out.
And despite the tax benefits, traditional loans still exist. If you have good credit and stable income, a personal loan or home equity line might offer lower rates without the liquidation risk. The credit check is annoying, but you won't lose your collateral during a market crash.
Making the Decision
The Bitcoin-backed lending market has matured since its chaotic early days. Rates are lower, platforms are more transparent, and the worst actors have been flushed out. For holders who understand the mechanics and risks, it's a legitimate tool for accessing liquidity.
But maturity doesn't mean safety. You're still exposed to Bitcoin's volatility, platform solvency, and your own ability to manage margin calls during stressful market conditions. Start conservative. Keep reserves for collateral top-ups. And never borrow more than you can afford to see liquidated at the worst possible moment.
The goal is to keep your stack intact. That means respecting the risks as much as the opportunity.