The Rise of Bitcoin-Backed Loans
As of October 2025, Bitcoin-backed loans are now worth more than $10 billion and are expected to grow to roughly $60 billion by 2031, according to some estimates.
A Bitcoin-backed loan enables you to borrow cash or stablecoins without selling your Bitcoin. You maintain exposure to BTC's future upside while freeing up money for real-world purposes, such as purchasing a home, financing a business, or covering life's major costs.
It is the modern equivalent of what affluent investors have done for decades: borrow against assets such as stocks or real estate that they anticipate will continue to appreciate.
The rise of Bitcoin-backed loans stems from their unique ability to give crypto holders rapid cash without asking them to liquidate their holdings.
Why Bitcoin Is Used as Loan Collateral
The biggest reason why Bitcoin is used as collateral is to acquire liquidity without having to sell Bitcoin. This can be favorable not only in terms of taxation, but it also allows for more participation in potential price hikes. Long-term investors, in particular, employ Bitcoin-backed loans to strategically deploy their assets rather than liquidating them.
Imagine a lady named Sarah who has Bitcoin worth $130,000. She needs $30,000 to expand her business, but doesn’t want to sell her Bitcoin. Instead of liquidating it and losing potential future gains, she used her Bitcoin as collateral with ViaBTC. She deposited part of her Bitcoin and used the $30,000 loan to grow her business while still holding onto her Bitcoin investment. After a month, Bitcoin rose by 5%. She profited from the rise and also paid back her loan after 2 months. Instead of selling part of her Bitcoin to expand her business, she used a Bitcoin loan and also profited from the increase in Bitcoin price.
Understanding Collateralized Loans in Crypto
Collateralized loans in cryptocurrency enable borrowers to receive money (fiat or stablecoins) by putting their digital assets as collateral. This strategy provides liquidity without selling the underlying assets, which has advantages such as tax efficiency and quick processing, but it carries significant risks, particularly owing to market volatility.
To understand how collateralized loans work in crypto, you need to understand the following terms: LTV (Loan-to-Value), Interest Rates, Liquidation Risks, and Security of Assets.
-Loan-to-Value (LTV)
In crypto collateralized loans, the Loan-to-Value (LTV) ratio is the ratio of the loan amount to the value of the cryptocurrency used as collateral. It is a risk assessment tool for lenders, with a higher LTV signifying increased risk. Because cryptocurrency values are unpredictable, LTV can fluctuate often, and if it rises too high as the collateral's value declines, your collateral can be liquidated to cover the loan.
Calculation: The basic formula is:
(LTV = (Loan Amount/Collateral Value) x 100%).
Example: If you take out a loan of $1,000 and use $10,000 in cryptocurrency as collateral, your initial LTV is 10% (1,000/10,000 x 100 = 10%).
-Interest Rates
Interest rates on crypto-collateralized loans often range from 3% to more than 20% APR, but they are very variable and strongly dependent on the specific platform, collateral type, loan-to-value (LTV) ratio, and overall market conditions. ViaBTC's annual interest rate is 9.9% which is below the market average.
-Liquidation Risks
Liquidation risk is the principal risk that a borrower faces in crypto-collateralized loans: the lending platform's forced, automatic liquidation of their pledged cryptocurrency collateral to settle the outstanding loan if the collateral's value falls below a specified level. Borrowers are often required to deposit more value in crypto than the value of the asset they borrow (for example, deposit $10,000 in Bitcoin to borrow $5,000 in stablecoins). This provides the lender with a safety margin.
-Security of Assets
Crypto collateralized loans ensure asset security through a mix of over-collateralization, custody mechanisms (third-party custodians or smart contracts), and automated liquidation procedures based on the Loan-to-Value (LTV) ratio. These systems try to protect the lender from default risk, but they also present special security risks to the borrower.
Key Features of ViaBTC’s Collateral-Pledged Loan Service
ViaBTC Collateral-Pledged Loan is a tool designed for miners and crypto users. Any ViaBTC user can pledge mainstream assets—such as BTC, LTC, DOGE, and BCH—to borrow USDT, gaining liquidity without selling coins to cover cash flow, expansion, or living expenses, while preserving upside potential.
The following are key features of the ViaBTC Collateral-Pledged Loan:
- Low rates: Annual interest rate of 9.9%, well below the market average.
- Flexible limits: Borrow from 50 USDT with no upper cap, serving both retail and institutional clients.
- Instant disbursement: Receive USDT immediately after pledging, with funds arriving in seconds.
- Flexible repayment: Flexible terms; borrow and repay anytime, with daily interest accrual. This means you repay at your own pace, in crypto or stablecoins.
- Multi-asset combined collateral: In a single position, pledge multiple assets—BTC, LTC, DOGE, and BCH—ideal for miners mining multiple coins.
- Easy to use: One-click pledge and fast redemption.
Step-by-Step Guide to Using ViaBTC’s Collateral-Pledged Loan
The process of acquiring a loan with the ViaBTC Collateral-Pledged Loan is simple, and it involves five steps after creating an account with some assets already acquired on the platform:
1.Add Collateral: This is the first step when adding collateral you want to use to acquire the loan.
2.Apply for a Loan: You proceed to apply for the loan after setting the amount you want to receive.
3.Receive Loan: You receive the loan you want.
4.Repay Loan: This is where you repay your loan, including interest.
5.Redeem Collateral: You receive your pledged collateral after repaying your loan.
Conclusion
Bitcoin-backed loans are more than a passing trend; they represent a significant shift in financial management and innovation. As the landscape evolves, stakeholders have to manage the related risks and regulatory constraints while benefiting from the opportunities that this emerging sector provides.
Disclaimer
The opinions expressed in this article are for informational purposes only. This article does not constitute an endorsement of any of the products and services discussed or investment, financial, or trading advice. Qualified professionals should be consulted prior to making financial decisions.