Need Cash but Don’t Want to Sell Bitcoin? Here’s How Crypto-Backed Loans Work

TL;DR

• Crypto-backed loans allow Bitcoin, Ethereum, and Solana holders to access liquidity without immediately selling their assets.
• Borrowers pledge crypto as collateral and receive cash based on a loan-to-value ratio.
• The main risks are market volatility, margin calls, interest costs, and liquidation. For long-term holders, the structure can provide an alternative to selling while maintaining exposure to crypto.
  

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Crypto-backed loans are becoming a practical financing option for investors who want liquidity while maintaining exposure to digital assets. Instead of selling Bitcoin to cover a major expense, borrowers can use their holdings as collateral and receive cash while retaining ownership.

The basic structure is straightforward. A lender accepts Bitcoin, Ethereum, or Solana as collateral and advances a portion of its market value. The loan-to-value ratio, or LTV, determines how much can be borrowed. A lower LTV generally provides a larger safety cushion if the crypto market falls.

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