Crypto-Backed Loans Offer Liquidity Without Selling Assets

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

The basic structure is straightforward: a lender accepts crypto as collateral and advances a portion of its market value based on the loan-to-value ratio (LTV). A lower LTV provides a larger safety cushion if the crypto market falls. For example, Figure currently advertises crypto-backed loans with an initial LTV of up to 75%, while its published rates vary according to the collateral and LTV selected.

The biggest distinction from conventional personal loans is the collateral. Bitcoin can move sharply in a short period, meaning a falling asset price can increase the LTV and trigger a margin call. If the required adjustment is not made, the lender can liquidate some or all of the collateral under the loan agreement.