Bitcoin-backed loans let you borrow cash against your BTC without selling — avoiding taxable events while keeping your Bitcoin exposure. This guide covers how they work, which providers to use, and how to stay safe.
You need cash. You hold Bitcoin. Selling feels wrong — you'd trigger a taxable event, lose your BTC exposure, and potentially miss the next move up. Bitcoin-backed loans solve this.
With a bitcoin-backed loan, you deposit your BTC as collateral and receive cash (usually USD or stablecoins) without selling. You keep your Bitcoin exposure, get liquidity, and pay the loan back over time. When you do, you get your collateral back.
Think of it like a mortgage — except instead of pledging your house, you're pledging your Bitcoin. The lender holds your BTC in custody while the loan is active.
The core mechanic:
The appeal is simple: you need liquidity without giving up your Bitcoin.
Here are the main reasons long-term holders turn to BTC loans:
Selling Bitcoin is a taxable event in most countries. If you've held BTC for years, selling means capital gains tax — potentially 20%+ on your gains. Borrowing against your Bitcoin is not a taxable event. You get cash without touching your tax liability.
For a full breakdown, see our Bitcoin Tax Guide 2026.
If you sell Bitcoin to cover expenses, you lose your upside. A loan lets you have cash in hand while staying fully exposed to Bitcoin's price appreciation. If BTC goes up while your loan is active, you keep all of that gain.
Bitcoin-backed loans are used for home purchases, business expenses, emergency cash reserves, investing in other assets, and paying taxes — all without selling your BTC.
Before you take out a bitcoin loan, understand these terms. Getting them wrong can cost you your collateral.
The LTV is the ratio of your loan amount to your collateral value. If you deposit 1 BTC worth $100,000 and borrow $50,000, your LTV is 50%.
Lower LTV = safer position. Most lenders start you at 40–60% LTV and have margin call thresholds around 70–80%.
Your Bitcoin deposited with the lender to secure the loan. Your BTC is locked until the loan is repaid. Choose a lender with strong custody practices — your BTC security depends on it.
If Bitcoin's price drops and your LTV rises above the lender's threshold, you'll receive a margin call. You have a limited time (often 24–72 hours) to either:
If you don't respond to a margin call, the lender liquidates (sells) enough of your collateral to bring the LTV back into range. This is the worst-case scenario — you lose Bitcoin at a low price.
Protection strategy: Borrow at a low LTV (30–40%) so Bitcoin needs to fall 50%+ before a margin call triggers.
Not all bitcoin loan providers are created equal. Custody model matters as much as interest rate.
| Provider | Max LTV | Min Loan | Interest Rate | Custody Model |
|---|---|---|---|---|
| Unchained | 50% | $10,000 | 12–14% APR | Multi-sig (you hold a key) |
| Ledn | 50% | $1,000 | 10–12% APR | Third-party custodian |
| Nexo | 50% | $500 | 6–14% APR | Centralized |
| SALT | 60% | $5,000 | 12–15% APR | Centralized |
| Figure | 60% | $10,000 | 9–14% APR | Centralized |
Unchained uses a collaborative multi-signature custody model. Your collateral is held in a 2-of-3 multisig vault — you hold one key, Unchained holds one, and an independent key agent holds the third. No single party can take your Bitcoin. This is the gold standard for loan custody, and they focus exclusively on Bitcoin.
Ledn is a Canadian Bitcoin lending company with a clean track record. They offer proof-of-reserves attestations and have served Bitcoin holders since 2018. Good option if you want a smaller loan without the $10,000 minimums that competitors require.
Nexo allows loans starting at $500, making it accessible to smaller holders. They offer a flexible line-of-credit model where you only pay interest on what you draw. Note: Nexo is centralized, so you're trusting their custody entirely.
SALT and Figure both offer up to 60% LTV, meaning more cash from the same Bitcoin. Useful if you need maximum liquidity — but higher LTV means a smaller price drop triggers your margin call. Only use 60% LTV if you have a clear, short-term repayment plan.
These loans are powerful tools, but they carry real risks.
If Bitcoin crashes fast — as it did in 2020 and 2022 — margin calls can cascade. If you can't top up collateral in time, you lose BTC at the bottom. Always borrow at 30–40% LTV to give yourself a buffer.
Example: You deposit 1 BTC at $100,000 and borrow $40,000 (40% LTV). Your margin call triggers at 75% LTV. Bitcoin would need to drop to ~$53,000 before you get a margin call. That's a 47% drop — painful, but gives you time to react.
You're trusting the lender to custody your Bitcoin safely and return it when the loan is repaid. Centralized lenders have failed before: BlockFi, Celsius, and Voyager all collapsed in 2022, taking customer funds with them. Choose lenders with strong track records, regulated status, and transparent custody arrangements.
Most Bitcoin loans carry 10–15% APR. On a $50,000 loan, that's $5,000–$7,500 per year in interest. Make sure you have a clear plan for repayment before you borrow.
Bitcoin lending regulations vary by country and are actively evolving. Make sure your lender is compliant in your jurisdiction before depositing collateral.
Ask yourself these five questions before signing up:
1. How do they custody my Bitcoin? Multi-signature custody (like Unchained) is the safest. Centralized custody means you're trusting the company not to fail, get hacked, or freeze withdrawals.
2. What's the margin call threshold? Know exactly what BTC price triggers a margin call. Calculate it before you borrow. Never be surprised by a liquidation.
3. What's the total cost? Compare origination fees + monthly interest + early repayment fees. Some lenders look cheap on the headline rate but stack fees.
4. Are they regulated? Look for licensing in your jurisdiction. US-based lenders should hold state lending licenses.
5. What's the loan term? Some loans are 12-month terms; others are open-ended lines of credit. Match the loan structure to your expected repayment timeline.
Is borrowing against Bitcoin a taxable event? In the US and most countries, taking a loan is not a taxable event. You're not selling; you're borrowing. Consult a tax professional for your specific situation. See our Bitcoin Tax Guide 2026 for more.
What happens if Bitcoin crashes during my loan? Your LTV rises. If it hits the margin call threshold, you need to add collateral or repay part of the loan. If you can't respond in time, your collateral gets liquidated.
Can I get a Bitcoin loan without selling any crypto? Yes — that's the entire point. You deposit BTC, receive cash, and your BTC is returned when you repay the loan.
How much can I borrow against my Bitcoin? Typically 40–60% of your BTC's current market value. At 50% LTV with 1 BTC at $100,000, you'd receive $50,000.
What's the minimum amount to get a Bitcoin loan? Varies by provider. Nexo starts at $500. Unchained requires a $10,000 minimum. Most lenders require at least 0.1–0.5 BTC as collateral.
Is my Bitcoin safe while it's used as collateral? Depends on the lender. With Unchained's multisig model, no single party controls your BTC. With centralized lenders, you're fully trusting their security and solvency.
Bitcoin-backed loans are a legitimate tool for long-term holders who need liquidity without selling. The key ingredients for doing this safely: choose a provider with strong custody, borrow at a conservative LTV (30–40%), and have a clear repayment plan before you touch a dollar of the loan.
The biggest mistake is over-leveraging. Borrow what you need, not what you can. Bitcoin's volatility means a 40% price drop is always possible — and if that triggers a margin call you can't meet, you'll lose your Bitcoin at exactly the wrong time.
Related reading:
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