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.
The most important number in a Bitcoin-backed loan isn't the interest rate — it's the loan-to-value ratio (LTV). Get this wrong and your Bitcoin gets liquidated automatically, often at the worst moment. Get it right and you can borrow against your Bitcoin, keep your long-term exposure, and access liquidity without triggering a taxable sale.
This guide explains LTV ratios, how liquidation works, and exactly how to manage risk when borrowing against Bitcoin.
Loan-to-value (LTV) is the ratio of what you owe to the value of your collateral.
Example: You pledge 1 BTC ($95,000) and borrow $50,000. Your LTV is 52.6% ($50,000 ÷ $95,000).
As Bitcoin's price changes, your LTV changes automatically:
The lower your initial LTV, the more Bitcoin can fall before you face a margin call or liquidation.
| Lender | Max Initial LTV | Margin Call LTV | Liquidation LTV |
|---|---|---|---|
| Unchained Capital | 50% | 65% | 70% |
| Arch Lending | 50-60% | ~70% | ~80% |
| APX Lending | 50-60% | ~70% | ~75% |
| Ledn | 50% | 80% | 90% |
| Nexo | 50% | 70% | 83% |
Lenders differ significantly on where they call and where they liquidate. Unchained's tighter thresholds (70% liquidation) mean less buffer than Ledn's 90% — but Unchained uses non-custodial multisig, meaning they can't unilaterally move your Bitcoin without your signature.
At a 50% initial LTV, how much must Bitcoin fall to trigger liquidation?
Unchained (liquidation at 70% LTV):
Ledn (liquidation at 90% LTV):
The tradeoff: Ledn's higher liquidation threshold gives you more runway — but they hold custody of your Bitcoin. Unchained's tighter threshold requires more active monitoring — but their multisig means no unilateral liquidation without your co-signature.
When your LTV approaches the margin call threshold, you have three options:
Deposit additional Bitcoin to reduce your LTV. If your LTV hits 65% (margin call territory), adding 20% more Bitcoin as collateral brings you back to roughly 54% LTV.
Pros: Keeps the loan intact, avoids forced liquidation Cons: Requires having additional Bitcoin available; you're adding more collateral at a low price
Pay down a portion of the loan principal. Every dollar repaid reduces the numerator of your LTV calculation.
Pros: Reduces ongoing interest, improves your position Cons: Requires cash — which you may not have if you took the loan for liquidity
If you don't add collateral or repay, the lender liquidates enough Bitcoin to bring LTV back to acceptable levels (or fully closes the loan).
The ugly reality: Liquidations happen at market prices during drawdowns. When Bitcoin falls 25%, market liquidity often drops too, and lenders may execute at prices even worse than spot. You can lose more than you expect.
A practical rule: never borrow at more than 30% LTV unless you have a clear plan to respond to a 40-50% Bitcoin correction.
At 30% LTV with a 70% liquidation threshold:
A 30% LTV loan survives most corrections. An 80% LTV loan gets liquidated in normal volatility.
Higher LTV = higher risk = higher interest rate:
| LTV Range | Typical Annual Rate | Risk Level |
|---|---|---|
| 20-30% | 8-12% | Low |
| 30-50% | 10-14% | Moderate |
| 50-60% | 12-18% | High |
| 60-70% | 14-20%+ | Very high |
At lower LTVs, you borrow less — but you sleep better. The ideal loan pays for something that earns more than the interest rate, with enough collateral buffer to survive a bear market.
Custodial loans (Ledn, Nexo): The lender holds your Bitcoin. They can liquidate without your signature. Faster, simpler, more products available.
Non-custodial loans (Unchained): Unchained Capital uses a 2-of-3 multisig structure — Unchained holds one key, you hold two. They cannot liquidate without your co-signature (they get it via loan agreement, but the structure provides transparency and a paper trail). This is meaningfully safer from an operational security perspective.
For large loans, non-custodial multisig is strongly preferred. See our Unchained vs. Ledn vs. Coinbase bitcoin loans comparison.
Borrowing against Bitcoin is not a taxable event in the US. You receive cash without selling, so no capital gains trigger. This is the primary reason people take Bitcoin-backed loans: access liquidity without realizing gains.
However:
Good use cases:
Bad use cases:
What happens if I can't repay a Bitcoin-backed loan? The lender liquidates your Bitcoin collateral to recover the loan balance. If liquidation proceeds exceed the loan balance, you receive the surplus. If Bitcoin has fallen far enough, proceeds may not fully cover the loan — some lenders may pursue a deficiency balance.
Can I get a Bitcoin loan without KYC? No reputable institutional lender offers Bitcoin loans without KYC/AML compliance. Some DeFi protocols (Aave, Compound) allow borrowing with crypto collateral without identity verification, but these carry smart contract risk and no legal recourse.
How quickly do liquidations happen? Most custodial lenders trigger liquidation automatically when the threshold is breached — within minutes to hours. Unchained's multisig model requires more coordination, but the loan agreement gives them authority to act. Expect fast action during major market moves.
Can I extend the loan if I can't repay? Most lenders allow refinancing or extension if LTV is in good standing. Discuss options early — do not wait until LTV is critical to contact your lender.
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