Bitcoin-backed loans allow users to borrow fiat or stablecoins by pledging BTC as collateral. This mechanism avoids the capital gains tax associated with selling assets. Lenders typically set loan-to-value ratios between 30% and 70%, with many starting at 50%.
The sector has seen significant growth, with centralized lending volume more than tripling from its late-2023 low. In Q2 2026, total crypto-backed loan volume reached $56.16 billion. Coinbase has surpassed $1 billion in loan originations.
Institutional involvement is increasing, exemplified by Ledn closing a $188 million asset-backed securitization in February 2026. S&P Global assigned a BBB- rating to the senior class of this portfolio, marking a milestone for investment-grade crypto-collateralized lending.
Interest rates vary by provider and loan size. As of October 2026, Coinbase rates start at approximately 5.8%, while SALT offers 7.49% to 10.5% APR. Other providers like Unchained quote 12% interest, with APRs reaching 14.18%.
Risk management has evolved, with some lenders adopting multisig vaults to prevent rehypothecation. However, market volatility remains a primary concern, as sharp price drops can lead to liquidation for overextended borrowers.
