Bitcoin-Backed Loans Are Reshaping Traditional Lending
Main Idea
Bitcoin-backed loans are emerging as a digital wealth strategy, with platforms like Coinbase and Aave facilitating this trend, though volatility and liquidation risks remain significant concerns.
Key Points
1. Bitcoin-backed loans on Coinbase surpassed $1 billion in mid-July 2025, indicating growing adoption of this wealth strategy.
2. Aave is a leading non-custodial lending solution with $33.2 billion in total value locked (TVL), but it requires using wrapped bitcoin (WBTC or cbBTC) as collateral.
3. Loan-to-Value (LTV) ratios and liquidation risks are critical considerations; borrowing 25-33% of collateral value is recommended to mitigate volatility risks.
4. Bitcoin's price volatility poses a significant risk, as seen in the 80% drop from January 2022 to March 2024, which could lead to loan liquidations.
5. Asset-based lending is projected to grow from $701 billion in 2024 to $1.3 trillion by 2030, with bitcoin-backed loans already accounting for $7.55 billion (1% of the market).
6. Some traditional banks, like JPMorgan, have started accepting bitcoin as collateral, signaling potential broader adoption in the future.
Description
Bitcoin-backed lending is going mainstream as banks, DeFi protocols, and institutions adopt BTC as collateral, giving investors liquidity without selling.
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