How to Borrow Up to $1M Against Your Bitcoin Holdings WITHOUT Selling
Without selling, U.S. users can now borrow up to $1 million in USDC against their Bitcoin holdings. What is that about, and how could it reshape the crypto market?
Coinbase Launches Bitcoin-Backed Loans for U.S. Users
In a major move for crypto adoption, Coinbase, the largest U.S.-based exchange, has announced that eligible U.S. users can now borrow up to $1 million in USDC by using their Bitcoin as collateral. This offering is available across most U.S. states—excluding New York—and represents a major leap toward integrating decentralised finance (DeFi) capabilities into mainstream crypto services.
This service is powered by Morpho Labs, a DeFi lending protocol, and utilises Coinbase's native Layer-2 network, Base, allowing for fast and low-cost transactions.
Why This Matters: Unlocking Bitcoin Without Selling It
One of the longstanding frustrations for Bitcoin holders is the inability to access liquidity without having to sell their assets—often triggering taxes or missing out on future gains.
Coinbase’s new loan feature solves this problem:
- No need to sell BTC: Investors retain exposure to Bitcoin while unlocking capital in USDC.
- Avoid taxable events: Borrowing isn’t a sale, so it may help users defer or minimise tax liabilities.
- Flexible access to funds: Users can borrow significant amounts without going through traditional banks.
This could lead to an increased incentive for long-term holding, encouraging adoption among institutional and retail investors alike.
Market Impact: A Boost for Bitcoin and DeFi
The immediate effect of this feature may be bullish for Bitcoin:
- Increased demand and HODLing: With access to liquidity, fewer investors will feel pressure to sell.
- DeFi integration on Base: Coinbase’s promotion of Base and Morpho Labs shows its commitment to bridging centralised and decentralised finance.
- More utility for BTC: Bitcoin becomes not just a store of value but a productive asset.
Additionally, the use of cbBTC (Coinbase-wrapped Bitcoin) raises the DeFi compatibility of BTC, adding further utility within the Base ecosystem.
Pressure on Competitors: What Now for Binance, Kraken, and Others?
This move puts pressure on Coinbase’s biggest competitors:
- Binance and Kraken may need to launch or improve their own crypto-backed lending services.
- Crypto lending platforms like Nexo and BlockFi (if revived) could lose ground if they don’t offer competitive terms.
- Traditional finance institutions might be forced to accelerate crypto integration or risk falling behind.
Coinbase’s seamless experience, user trust, and regulatory standing in the U.S. give it a unique edge that many DeFi protocols and offshore exchanges may struggle to match.
Risks and Considerations
Despite its advantages, this loan service isn’t risk-free:
- Custodial Control: Users must trust Coinbase with their BTC, which is converted to cbBTC.
- Liquidation Risk: A sharp Bitcoin drop could trigger forced liquidations if loan-to-value (LTV) ratios are breached.
- Regulatory Oversight: The IRS and other regulators may eventually scrutinise how cbBTC is taxed or classified.
As with any financial product, especially in crypto, users should evaluate the terms and associated risks before borrowing.
Coinbase’s Bitcoin-backed lending feature is a bold step forward for crypto utility and mainstream adoption. By letting users borrow against their BTC without selling, Coinbase is not only driving innovation but also setting a new standard in user-focused financial products. Expect more exchanges to follow—and fast.
Rudy Fares
Equity Trader, Financial Consultant, Musician and Blockchain Aficionado. I spend my time doing Technical and Fundamental Analyses for Stocks, Currencies, Commodities and Cryptocurrencies.
Coinbase Launches Bitcoin-Backed Loans for U.S. Users
In a major move for crypto adoption, Coinbase, the largest U.S.-based exchange, has announced that eligible U.S. users can now borrow up to $1 million in USDC by using their Bitcoin as collateral. This offering is available across most U.S. states—excluding New York—and represents a major leap toward integrating decentralised finance (DeFi) capabilities into mainstream crypto services.
This service is powered by Morpho Labs, a DeFi lending protocol, and utilises Coinbase's native Layer-2 network, Base, allowing for fast and low-cost transactions.
Why This Matters: Unlocking Bitcoin Without Selling It
One of the longstanding frustrations for Bitcoin holders is the inability to access liquidity without having to sell their assets—often triggering taxes or missing out on future gains.
Coinbase’s new loan feature solves this problem:
- No need to sell BTC: Investors retain exposure to Bitcoin while unlocking capital in USDC.
- Avoid taxable events: Borrowing isn’t a sale, so it may help users defer or minimise tax liabilities.
- Flexible access to funds: Users can borrow significant amounts without going through traditional banks.
This could lead to an increased incentive for long-term holding, encouraging adoption among institutional and retail investors alike.
Market Impact: A Boost for Bitcoin and DeFi
The immediate effect of this feature may be bullish for Bitcoin:
- Increased demand and HODLing: With access to liquidity, fewer investors will feel pressure to sell.
- DeFi integration on Base: Coinbase’s promotion of Base and Morpho Labs shows its commitment to bridging centralised and decentralised finance.
- More utility for BTC: Bitcoin becomes not just a store of value but a productive asset.
Additionally, the use of cbBTC (Coinbase-wrapped Bitcoin) raises the DeFi compatibility of BTC, adding further utility within the Base ecosystem.
Pressure on Competitors: What Now for Binance, Kraken, and Others?
This move puts pressure on Coinbase’s biggest competitors:
- Binance and Kraken may need to launch or improve their own crypto-backed lending services.
- Crypto lending platforms like Nexo and BlockFi (if revived) could lose ground if they don’t offer competitive terms.
- Traditional finance institutions might be forced to accelerate crypto integration or risk falling behind.
Coinbase’s seamless experience, user trust, and regulatory standing in the U.S. give it a unique edge that many DeFi protocols and offshore exchanges may struggle to match.
Risks and Considerations
Despite its advantages, this loan service isn’t risk-free:
- Custodial Control: Users must trust Coinbase with their BTC, which is converted to cbBTC.
- Liquidation Risk: A sharp Bitcoin drop could trigger forced liquidations if loan-to-value (LTV) ratios are breached.
- Regulatory Oversight: The IRS and other regulators may eventually scrutinise how cbBTC is taxed or classified.
As with any financial product, especially in crypto, users should evaluate the terms and associated risks before borrowing.
Coinbase’s Bitcoin-backed lending feature is a bold step forward for crypto utility and mainstream adoption. By letting users borrow against their BTC without selling, Coinbase is not only driving innovation but also setting a new standard in user-focused financial products. Expect more exchanges to follow—and fast.
Rudy Fares
Equity Trader, Financial Consultant, Musician and Blockchain Aficionado. I spend my time doing Technical and Fundamental Analyses for Stocks, Currencies, Commodities and Cryptocurrencies.
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