How to Borrow Against Crypto

Using crypto to pay for a transaction or raise funds is an obvious choice but often the wrong move for someone who is looking at holding crypto for the long run. In doing so, you give up control of assets you want to hold, and more often than not, you end up triggering a taxable event.

The other option is borrowing against your crypto. You lock up the crypto in your possession, you borrow cash or stablecoins against your crypto, and your asset position is left intact. The wealthy have used their assets in this way for a while, by borrowing rather than selling so that gains continue piling up. It is just borrowing against a different kind of asset.

This issue has its nuance as well because there is a difference between various types of crypto loans. Here we are talking about collateralized, non-custodial loans where you stay the owner on-chain.

What Does It Mean to Borrow Against Bitcoin and Crypto?

Crypto borrowing involves using your digital currency as collateral in order to borrow money. In such a scenario, the crypto asset will be held while you borrow some money from either a lending platform or a decentralized finance protocol, and upon repayment of the debt, you get back your crypto asset. Your Bitcoins (or other cryptocurrencies) will keep on doing their job, but you’ll be able to access your liquidity.

So, can you borrow against Bitcoin? Can you borrow against crypto in general? The answer is yes to both questions. And you can borrow against any significant crypto asset including Ethereum or Solana. The point is in separating two concepts which are often considered as a single one – the value of an asset and its sale. 

A crypto-backed loan allows you to use funds according to the value of your cryptocurrency but does not require closing your position. That market has grown significantly and become more and more decentralized; crypto-collateralized lending achieved the all-time high of around $73.6 billion in Q3 of 2025.

There is a taxation aspect to all of that, and it should be highlighted explicitly. In many jurisdictions, crypto assets are considered property. Thus, the Internal Revenue Service in the US officially stated that in its Notice 2014-21. This means that any sale of cryptos is a disposal which triggers capital gains or losses. However, borrowing against cryptos is not selling them.

Selling crypto to spend is generally a taxable disposal; borrowing against it is not a sale. Tax treatment depends on your country and circumstances. Not tax advice.

How Crypto-Backed Loans Work

Unlike traditional loans, a crypto-backed loan centers around collateral. There is no income verification and no need to look at credit history, which means that your funding can be available in minutes instead of a few days you’d get with a bank. You provide the collateral, get a loan, pay an interest rate or borrowing fee, and repay at your discretion to get the collateral back.

The critical element of this transaction lies in the loan-to-value ratio (LTV). It represents your loan in terms of the percentage of your collateral. You have deposited $10,000 worth of Bitcoin and you got a loan of $2,000 – the LTV of your position is 20%. The smaller this percentage, the better cushion you have before problems could appear due to price changes.

Usually, crypto loans are overcollateralized – it means that the total value of collateral exceeds the loan amount. This excess is considered a buffer since crypto assets can be rather volatile and the platform needs a margin of safety.

There are two ways in which the LTV could get closer to the platform threshold: either you get a bigger loan or the price of your collateral falls down. Let’s say that the $10,000 worth of Bitcoin is now worth only $8,000 while your loan is still $2,000: the LTV increases from 20% to 25%. Exceeding the platform threshold leads to margin calls or automatic liquidations when the part of your collateral is liquidated to restore the LTV.

And here is where the two models differ. In a centralized solution, you will be dependent on the company to keep your crypto and then give you the loan, so its solvency becomes an issue. In case of a non-custodial on-chain lending model, you are using audited smart contracts to do this transaction, which means you keep custody of your assets. In both cases, your risk is connected with the collateral, just the entity you have to trust changes.

How to Borrow Against Bitcoin Step by Step

Understanding how to borrow against Bitcoin, or how to borrow against crypto more broadly, comes down to picking the right platform and having enough wiggle room. Steps presented here do not differ depending on the specific platform used.

Choosing a Platform to Borrow Against Your Bitcoin

Let us start with custody, as this is important for all subsequent decisions. If you opt for a custodial lender, it means you hand them your Bitcoin, which has already happened in many cases in 2022 with a number of custodial lenders going bankrupt and their depositors becoming creditors. 

A non-custodial platform stores the asset on-chain, whereas the loan is handled through code. Both methods have their risks, but they fail differently: one through bankruptcy, the other – through smart-contract bugs.

Then take a closer look at practical aspects:

• Assets and region supported. Ensure that the platform supports your Bitcoin (as well as other assets that you might want to lend against), and operates in your region. Every platform supports a list of countries of its own.
• Rates and terms of loan. See the loan rate, whether it is fixed or fluctuating, and repayment terms. A fixed rate is known upfront, so it is much easier to deal with.
• Auditing. Choose those platforms that have smart contracts which are independently audited. Even if audits reduce the risk of a hack, it does not totally eliminate the possibility of it happening.
• Liquidation terms. Determine whether there will be a warning prior to hitting the threshold.

Depositing BTC and Setting Up Your Loan

After you’ve picked a platform and passed the identity verification process, you send in the Bitcoin that you will use for collateral purposes. For platforms that are regulated, the KYC procedure is mandatory and takes place first, according to the requirements of the legislation and the card issuers if there’s a card present.

But there’s one thing to be considered – since Bitcoin isn’t based on the smart contract chain, in order to make it work as a collateral, it needs to be tokenized as cbBTC, or some other token.

Once you’ve deposited your BTC, you set up the amount of the loan. This is the critical stage – the smaller the loan in relation to the collateral, the lower LTV ratio you have, which provides more cushion in case of a possible margin call. The reason why people are getting liquidated is because they take the maximum amount of money.

Receiving Funds and Managing Your Loan

The system decides the maximum limit and provides the funds – mostly in form of stable coins and cash. The money is yours to use as you wish, but the collateral stays locked up in the meantime.

At that point, the main thing for you is to be careful about your exposure to the situation – track the price of your collateral and the loan-to-value (LTV) ratio, and react quickly if things move against you on the market. 

Increasing the size of your collateral or paying off some of the loan reduces the LTV and moves the liquidation point further out. Paying off the whole loan frees the collateral from its pledge. In other words, that is how to get a Bitcoin loan: deposit, borrow cautiously, watch the LTV ratio, and repay.

With a credit line backed by a card, almost all of that process takes place behind the scenes as you spend, instead of you having to withdraw money manually. With XPlace in Credit Mode, the credit line behind your card is based on on-chain collateral.

Supported assets can be used as collateral instead of selling them right away, thus giving you liquidity while keeping the position in crypto. This is a non-custodial Visa card – in Credit Mode the collateral is kept in audited smart contracts on Kamino, and not on the company’s books, and the same deposit can earn yield through Kamino while it backs your credit line.

How to Borrow Against Your Crypto Portfolio

It might seem natural to start with Bitcoin, but in reality, the desire to borrow against multiple cryptocurrencies is not uncommon. Just like borrowing against your main Bitcoin, borrowing against your crypto portfolio requires similar considerations with an additional element: not all coins are created equal.

Supported Assets and LTV Limits

Each platform sets maximum loan-to-value (LTV) limits for each individual asset depending on the volatility of the coin. The more steady it is, the higher is the LTV limit; a more volatile coin has a lower LTV limit since there is a bigger chance that its value can drop drastically before someone does anything about it. When it comes to crypto-based loans, maximum LTV percentages usually range between 50% and 75% with stablecoins being allowed higher and less steady coins receiving the opposite treatment.

Keep in mind that the limit is a ceiling rather than a goalpost – borrowing right up to the limit provides very little room for maneuver, and one bad day on the market can send you straight to the liquidation. Maintaining some distance from the maximum allows you to weather some of the turbulence of regular price fluctuations without triggering a sale.

Borrowing Against BTC vs ETH vs Other Coins

The coin which you decide to back the loan with becomes an important factor when considering borrowing conditions. Both Bitcoin and Ethereum are backed by the deepest and most liquid markets out there, meaning that their loan terms are the most favorable, and, on blockchain platforms, they often require wrapping. Besides, Solana and other major cryptocurrencies are also widely supported despite having varying rates and limits.

A note on a portfolio consisting of several crypto assets: all of them are likely to correlate with each other during market sell-offs, therefore, a general LTV is likely to increase faster than any particular asset’s LTV, which means that your margin needs to consider the general movement of the portfolio.

How to Use Crypto as Collateral vs How to Borrow Crypto

Both of these terms are quite close and often confused with each other, although they have completely different meanings.

• The first is the relevant one: you have the crypto, you collateralize it, and you get cash or stablecoins for it. So, the crypto remains your security, and you intend to retrieve it.
• The second is its opposite: you get the crypto in question (usually the coin that you need), and you provide collateral for the loan in some other way. You can see the difference: one method implies using your assets to get funds; the other assumes borrowing a certain coin as a loan.

If you need to use your cryptocurrency without selling it, then borrowing against crypto will be more relevant in most cases. In case you are interested in borrowing crypto, and searching for instructions on how to do that, while actually needing to borrow against the crypto, it is necessary to realize the difference.

Risks You Need to Understand Before Borrowing

Borrowing against cryptocurrency is convenient, but risky, and it is better to be aware of that risk than pretend that it is not there.

• Liquidation: this risk is paramount. If the value of the collateral goes down and loan-to-value (LTV) ratio exceeds its threshold, then the platform is likely to sell part of the collateral, often at an unfortunate time for the owner. Keeping the LTV ratio low is the best way to guard against liquidation. Even if some systems offer liquidation protection, there will always be liquidation risks in collateralized borrowing.
• Volatility: the value of cryptocurrencies can fluctuate up to 10-20% per day and make a safe loan a margin call overnight. On 10 October 2025, more than $19 billion worth of leveraged cryptocurrency positions were liquidated in one day, making it the biggest collapse on record.
• Platform and custody: using a third-party custodial service entails the risk of bankruptcy of the latter. This particular risk materialized in 2022 and 2023, where Celsius, Voyager, BlockFi, and Genesis went bankrupt and left their customers with unsecured claims on deposits.
• Smart contracts: the on-chain lending is conducted through the smart contract, which is written by people and contains bugs. Therefore, even with the audit of a smart contract, there is always an intrinsic risk associated with it.
• A liquidation is a sale: liquidating part of the collateral means selling that part and, in most jurisdictions, the disposal of assets is a taxable event despite the borrowing process not being such.

The vast majority of losses are incurred as a result of either borrowing excessively from a highly volatile asset or trusting the wrong platform. The solution to the problem is straightforward: underborrow and use audited or non-custodial platforms.

Is Borrowing Against Bitcoin or Crypto Right for You?

At the end of the day, it depends on your intentions. If you want to hold the asset that is expected to grow in value but you require liquidity in the process, then borrowing against it gives you both: you access the value while keeping the position. On the other hand, if the plan was to sell the asset in any case, borrowing is an unnecessary expenditure of resources, so it’s better to just sell it.

Before making any decisions, answer yourself three questions. First of all, to what extent can my collateral lose its value before the usual fluctuations turn into something dangerous for me? Secondly, is this platform audited and do I have control over my private keys? Finally, in case of market crash, what actually will happen to my collateral?

If your answers satisfy you, then it’s time to borrow money. Otherwise, it’s an obvious indication to borrow less or nothing at all.

Conclusion

Through crypto lending, you will be able to use the value of the cryptocurrencies without selling them. This means using the crypto as collateral to obtain loans while the loan-to-value will show how close one is to being liquidated. Low LTV prevents you from getting liquidated because of a simple market fluctuation.

This is the concept that XPlace is based on: to spend but not to sell, to borrow against your cryptos in Credit Mode while spending and keeping yourself non-custodial all along. Your funds are either in your personal wallet or in an audited smart contract when you borrow. They are never held by us.

Yield is variable and not guaranteed. Withdrawals depend on protocol liquidity and may be temporarily limited during market stress. Past performance does not predict future results. Using assets as collateral exposes you to liquidation risk. You may lose your collateral if the market moves against your position.