“More Bitcoin holders are starting to ask the same question: Does it make more sense to borrow against BTC than sell it?” | Image credit: Hameem Sarwar / CCN
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Key Takeaways
Bitcoin holders are increasingly borrowing against BTC instead of selling as crypto-backed loan rates fall and traditional lending remains restrictive.
Institutional interest in Bitcoin-backed lending is growing, helping lower borrowing costs and expand access to crypto-backed credit markets.
BTC-backed loans allow holders to access liquidity without triggering taxable events or losing exposure to potential Bitcoin price gains.
Collateral-based lending is becoming more attractive for self-employed workers, crypto investors, and borrowers who struggle with traditional bank underwriting models.
The Fed held rates steady again last week. Mortgage costs are climbing.
More Bitcoin holders are starting to ask the same question: Does it make more sense to borrow against BTC than sell it? As borrowing costs fall, that calculation looks very different from what it did a few years ago.
For most of Bitcoin’s history, borrowing against it was expensive and came with real risk.
Rates above 12%
Aggressive liquidation thresholds
Platforms that occasionally disappeared with your collateral
It was a hard sell for anyone who wasn’t already deep in the space.
That picture is changing. BTC-backed loan rates have started dropping below 10% at the top end of the market.
To put that in context, the average Home Equity Line of Credit (HELOC) rate right now is 7.17%. A30-year fixed mortgage is running at 6.43%, assuming you can qualify.
Banks remain tight on underwriting even with rates sitting 200 basis points below their 2023 peak.
The spread between crypto-backed lending and traditional secured lending is narrowing. For a growing number of Bitcoin holders, the trade-off makes sense: slightly higher interest in exchange for no credit check, no income verification, and full BTC exposure maintained.
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First, Bitcoin as collateral is getting real institutional validation. In February, the ABS market priced its first-ever rated deal backed by Bitcoin-collateralized loans. It was more than two times oversubscribed.
Large institutional investors are increasingly taking Bitcoin-backed lending seriously, including firms that typically focus on traditional credit markets.
Here’s the number that matters: less than 1% of crypto-related ABS currently carries an investment-grade rating.
In the traditional ABS market, that figure is 80 to 90%.
That gap is where the opportunity sits. As more deals get rated and more institutional capital enters the back end, borrowing costs on the front end compress.
This is the same dynamic that brought 30-year mortgage rates from double digits to low single digits over four decades. Bitcoin-backed lending is now on that same path. It’s just very early.
Second, the macro environment is making traditional borrowing harder.
The Iran conflict has pushed oil prices and inflation expectations higher.
Mortgage rates have climbed 25 basis points since February.
As a result, the window for borrowers is getting tighter.
“If you own Bitcoin and need liquidity, selling is one option.” | Source: Mauricio Di Bartolomeo
How Bitcoin Holders Are Using BTC for Liquidity
If you own Bitcoin and need liquidity, selling is one option. But selling triggers a taxable event, removes your upside exposure, and means buying back in later at whatever price the market gives you.
Borrowing against it avoids all three:
You keep your Bitcoin.
You get dollars.
You pay interest instead of capital gains tax.
If BTC appreciates while your loan is outstanding, you come out ahead on both sides.
Around 30% of large BTC-backed loans are already going toward real estate, whether that’s buying property or renovations. This is Bitcoin being used as productive capital.
Collateral risk exists, as it does with any secured loan. Most platforms operate at 50% loan-to-value with margin call buffers and the ability to top up.
Bitcoin works differently from assets like property or cars. It trades 24/7, it is easy to move, and lenders do not need appraisals or inspections before using it as collateral.
Why BTC-Backed Loans Are Becoming More Competitive
What’s happening here is part of a larger shift.
Credit markets are starting to care more about what you own than what you earn.
Traditional lending is built on income verification, credit scores, and employment history.
Collateral-based lending inverts that.
The asset secures the loan.
The result? The borrower’s profile becomes secondary.
That matters for anyone who holds real value in Bitcoin but doesn’t fit neatly into a bank’s underwriting model. For example, self-employed people. gig workers, international earners. Basically, anyone whose wealth sits in crypto rather than home equity.
BTC-backed loans aren’t replacing mortgages but filling a gap that traditional lenders have left wide open, and the terms are getting more competitive every quarter.
Borrowing costs usually fall as lending markets mature and more institutional capital enters the space. Bitcoin-backed lending appears to be moving in that direction. Rates have started coming down, infrastructure is improving, and larger investors are beginning to participate more actively in the market.
Disclaimer:
The views, thoughts, and opinions expressed in the article belong solely to the author, and not necessarily to CCN, its management, employees, or affiliates. This content is for informational purposes only and should not be considered professional advice.
About the Author
Mauricio Di Bartolomeo
Mauricio Di Bartolomeo is the co-founder and CSO of Ledn, a leading provider of bitcoin-backed loans. He found Bitcoin during hyperinflation in Venezuela and believes in the future of the digital economy.
