Bitcoin-backed loans in 2026: borrow USD against your BTC without selling. How LTV works, top lenders (Unchained, Ledn, Arch, SALT, Nexo), liquidation risk explained, and tax treatment.
You've accumulated Bitcoin. Now you need cash — for a business opportunity, an emergency, a down payment, or just to cover expenses. Selling Bitcoin means a taxable event and giving up future upside. A Bitcoin-backed loan solves both problems: borrow dollars using your Bitcoin as collateral, keep the Bitcoin, repay the loan later.
This is the beginner's guide to how Bitcoin loans work, what they cost, and what can go wrong.
A Bitcoin-backed loan works like a pawn shop, but for Bitcoin:
You never sell the Bitcoin. No capital gains tax. No losing your position. If Bitcoin goes up while you're borrowing, you keep all of that gain.
The risk: If Bitcoin's price drops sharply, the lender may force you to add more collateral or repay the loan (a "margin call"). If you can't, they sell your Bitcoin to recover their money.
Loan-to-Value (LTV): The ratio of loan amount to collateral value.
Margin Call: A warning that your LTV has risen above a threshold (usually 70-80%) due to Bitcoin price decline. You must either add collateral or partially repay.
Liquidation: If you ignore a margin call and LTV reaches the liquidation threshold (usually 80-90%), the lender automatically sells your Bitcoin to repay the loan.
APR (Annual Percentage Rate): The yearly cost of borrowing. Bitcoin loan APRs typically range from 5-15% depending on lender and LTV.
Origination Fee: Some lenders charge an upfront fee (1-2%) when the loan is issued.
Most lenders offer loans at 50-70% LTV. Here's what that means in practice:
| BTC Price | BTC Held | At 50% LTV | At 60% LTV | At 70% LTV |
|---|---|---|---|---|
| $80,000 | 1 BTC | $40,000 | $48,000 | $56,000 |
| $80,000 | 0.5 BTC | $20,000 | $24,000 | $28,000 |
| $80,000 | 2 BTC | $80,000 | $96,000 | $112,000 |
Starting at 50% LTV gives you a safety buffer: Bitcoin would need to drop 37.5% before your LTV reaches the typical 80% liquidation threshold. Starting at 70% LTV, a 12.5% drop triggers a margin call.
The safest starting point for beginners: 50% LTV or lower.
Unchained is the most Bitcoin-native lender. What makes it unique:
For Bitcoin holders who prioritize sovereignty, Unchained's multisig model is the gold standard — you can verify your collateral is safe.
Ledn is a Bitcoin-focused lender with strong Canadian and international presence:
Ledn is the first choice for non-US Bitcoin holders.
Arch Lending offers one of the more flexible product structures:
SALT Lending is one of the oldest Bitcoin lending platforms (founded 2016):
Nexo operates a crypto credit line model:
Important note: Nexo is custodial — they hold your Bitcoin and have lending authority over it. Unlike Unchained, there's no multisig protection. Nexo has had regulatory issues in some jurisdictions; verify current availability in your region.
This is the scenario most beginners don't think through. Let's model it:
Setup: 1 BTC at $80,000, borrow $40,000 (50% LTV), liquidation threshold 80%.
Liquidation price: $40,000 loan ÷ 0.80 = $50,000 per BTC. If Bitcoin drops to $50,000, you're at 80% LTV and face forced liquidation.
That's a 37.5% price drop from your starting point. Bitcoin has dropped 80%+ in past bear markets. A 37.5% drop is well within historical norms.
How to protect yourself:
See Bitcoin Loan Liquidation Guide for detailed liquidation math and protection strategies.
Bitcoin-backed loans are not taxable events — you're borrowing, not selling. The IRS treats a loan as a liability, not income.
However:
This tax treatment is the primary reason Bitcoin loans are attractive: access liquidity without triggering capital gains on appreciated Bitcoin.
Good fit:
Not a good fit:
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Ledn is the largest Bitcoin-only lender still standing after the 2022 credit crisis. This review covers 2026 rates (7.9–12.9% APR), LTV limits, B2X product, proof of reserves, and comparison to Unchained and Coinbase.
The LTV ratio determines when your Bitcoin gets liquidated in a Bitcoin-backed loan. This guide explains how LTV works, what margin call and liquidation thresholds look like at major lenders, and how to borrow at a ratio that survives Bitcoin corrections.
Bitcoin loan liquidation happens when your collateral drops below the lender's threshold. Here's exactly how it works, the LTV math, and 7 strategies to protect yourself.