Crypto-Backed Loans Offer Liquidity Without Selling Digital Assets

Crypto-backed loans have become a practical financing option for investors who want to maintain their exposure to digital assets while accessing liquidity. Instead of selling their Bitcoin, Ethereum, or Solana holdings, borrowers can use them as collateral and receive cash based on the loan-to-value (LTV) ratio.

The LTV ratio determines how much can be borrowed against the collateral's market value. For example, Figure currently offers crypto-backed loans with an initial LTV of up to 75%. The company also states that borrowers can receive funding without relying on a traditional credit score.

Borrowers should examine the maximum LTV, interest rate structure, custody arrangements, fees, regulatory status, and liquidation procedures before committing their assets. This is especially important in volatile markets where the value of the collateral can fluctuate rapidly.