Last Updated on August 29, 2025 by Olga Davis
Using Bitcoin as collateral is like lending a valuable item to a trusted friend who gives you money in return and returns it when you’re done. A lender holds your Bitcoin securely and provides a loan, often in stablecoins. This approach lets you access liquidity for daily expenses while keeping your cryptocurrency invested. By the end of this guide, you’ll understand how can yo use Bitcoin as collateral for a loan, its benefits, potential risks, and how to use it effectively.
Why Use Bitcoin as Collateral? The Benefits
Using Bitcoin as collateral has clear perks that make it appealing:
💡 Keep Your Bitcoin
You don’t sell, so you stay in the game if BTC’s price jumps. No missing out on future gains or dealing with tax bills from selling.
Example: Elena, a 34-year-old freelancer in Berlin, has 0.7 BTC (~$78,000). She needs $10,000 for a trip but doesn’t want to sell and pay $3,000 in taxes. On CoinRabbit, she uses 0.3 BTC ($33,000) as collateral and borrows $10,000 in USDT. With a monthly rate of 1.473%, she pays about $884 interest over 6 months. When BTC rises, her 0.7 BTC is worth more than before, and she enjoyed her trip without selling her crypto.
💡 No Credit Checks Needed
Approval depends on your Bitcoin, not your credit score. This opens the door for anyone, even if your financial history isn’t perfect.
Example: Jamal, a 35-year-old entrepreneur in Chicago, has 0.3 BTC (~$33,000). He wants $5,000 to invest in expanding his small business. Banks would require extensive checks, but CoinRabbit approves a $5,000 USDC loan against 0.15 BTC in about 15 minutes. He uses the funds strategically, earns $8,000 in 3 months, and repays the loan plus ~$220 interest. His BTC grows in value, and he retains both his crypto and the business profits.
💡 Tax Advantage
Borrowing against your Bitcoin is not the same as selling it. In many countries, loans secured with crypto are not considered taxable events, meaning you don’t trigger capital gains taxes when taking the loan. This allows you to access cash immediately for investments, purchases, or business opportunities, while deferring any tax obligations until you eventually sell your Bitcoin.
Example: Liam, a 40-year-old from Toronto, has 1 BTC (~$111,000). He wants $15,000 for a motorcycle but selling would cost him $4,000 in taxes. On CoinRabbit, he borrows $15,000 in USDC with 0.15 BTC as collateral. His BTC rises in value, and he keeps both his crypto and the motorcycle.
How Much Can I Borrow Against My Bitcoin?
Using Bitcoin as collateral lets you borrow crypto based on your BTC’s value, with the amount determined by the platform’s loan-to-value (LTV) ratio. Here what’s important to know:
- LTV Ratio Sets Your Limit. The loan amount is a percentage of your Bitcoin holdings. CoinRabbit offers up to 90% LTV, allowing you to access a large portion of your BTC’s value. Choosing a lower LTV (50–70%) provides a comfortable safety buffer, helping to manage market fluctuations.
- Minimum Loans / Maximum Loan Limits. Most platforms set minimum and maximum loan amounts based on their policies and the type of collateral. Minimum loans allow even small Bitcoin holders to access funds, while maximum limits depend on factors like your holdings and the platform’s loan-to-value (LTV) rules. For example, CoinRabbit offers a very low minimum loan of $100, making it accessible to users with smaller BTC balances.
Bitcoin price chart. Source: coinmarketcap.com
Why Is Bitcoin the Best Choice for Collateral?
Bitcoin stands out as the top collateral choice due to its value, stability, and universal acceptance. Here’s why it’s ideal for Bitcoin as collateral, with clear points and a practical example.
- High Value, High Borrowing Power. Bitcoin’s price means even small amounts unlock significant loans, unlike lower-value altcoins.
- Lower Volatility. Compared to altcoins like ETH (30-50% swings), Bitcoin’s 20-30% yearly volatility reduces liquidation risks, making it safer for lenders and borrowers.
- Universal Acceptance. Nearly all platforms accept BTC as collateral, often with higher LTVs (up to 90% vs. 50-75% for ETH) and lower rates due to its reliability.
- Market Resilience. Bitcoin’s $2T+ market cap and global liquidity ensure stable collateral value, unlike smaller coins that can crash harder.
New to the world of crypto? Then don’t miss our guides to get you started confidently. Learn how hard it is to get a Business loan, and understand investment options like crypto ETFs. Discover the best anonymous crypto wallet for secure storage and step-by-step tips on how to send and receive Bitcoin safely.
What Are the Risks of Using Bitcoin as Collateral?
No financial move is without risks, and using Bitcoin as collateral has a few you need to know:
- Price Drops and Liquidation. Bitcoin’s price can swing. If it falls too much, your collateral might not cover the loan’s value (called the loan-to-value or LTV ratio). In 2025, volatility is still real: Bitcoin can drop 20% in a week.
- Platform Safety. Some lenders could face hacks or go bust. Pick platforms with strong security, like cold storage, multisig access and no rehypothecation.
- Interest and Repayment Terms. Late payments or mismanaging your loan can lead to higher costs or even forced liquidation. Before borrowing, make sure you fully understand the interest rate, repayment schedule, and any associated fees.
Top Platforms for Using Bitcoin as Collateral
Here’s a quick look at the best Bitcoin loans on the market:
| Platform | Type | Min Loan | APR Range | Max LTV | Key Features | Best For |
|---|---|---|---|---|---|---|
| CoinRabbit | CeFi | $100 | 16-17% | 90% | Instant loans, no verification, 300+ cryptos as collateral | Fast, flexible loans |
| Ledn | CeFi | $1,000 | 7-12% | 75% | Bitcoin focus, proof-of-reserves | Security-conscious hodlers |
| Nexo | CeFi | $500 | 0-16% | 50% | Credit card, insurance up to $375M | Multi-crypto users |
| Aave | DeFi | Varies | 5-15% | 75% | No KYC, Ethereum-based | Tech-savvy DeFi fans |
| Unchained Capital | CeFi | $10,000 | 8-12% | 50% | Multisig security | Privacy-focused users |
There are many platforms available online, so it’s important to do your research and read educational materials before choosing where to borrow. For example, don’t miss our detailed article comparing Coinbase vs Binance to understand key differences in platform features, fees, and usability.
Step-by-Step Guide: Using Bitcoin as Collateral on CoinRabbit
Using Bitcoin as сollateral on CoinRabbit is a simple way to borrow funds without selling your crypto:
1. Plan Your Loan
Visit CoinRabbit.io and use the loan calculator to determine your borrowing amount. Input the Bitcoin you want to use as collateral. Select a loan-to-value (LTV) ratio (50% – 90%). Choose your payout currency and sign up with an email or phone number to begin.
2. Deposit Your Bitcoin
CoinRabbit provides a wallet address for your collateral. Transfer your BTC from a secure crypto wallet to ensure safety. Verify the address carefully to avoid errors. CoinRabbit stores your Bitcoin in cold storage for enhanced security.
Tip: enable two-factor authentication (2FA) on your wallet and CoinRabbit account. This helps protect your Bitcoin and account from unauthorized access.
3. Receive Your Funds
Once your Bitcoin is confirmed on the blockchain, CoinRabbit approves your loan without credit checks. The funds are sent to your chosen crypto wallet within minutes, ready for use.
Tip: сhoose stablecoins like USDT to avoid payout volatility. Double-check your receiving wallet address to ensure safe delivery.
4. Monitor Your Loan
Track your loan using CoinRabbit’s dashboard or crypto app. If Bitcoin’s price drops, you may be asked to top up your collateral to maintain a healthy LTV and avoid liquidation.
Tip: enable the Auto Increase feature on CoinRabbit. This automatically adds additional collateral from your linked wallet if your LTV rises above a set threshold, helping you stay within a safe range without manual intervention.
5. Repay the Loan
Pay monthly interest based on your loan’s rate. There’s no fixed repayment schedule for the principal, so you can pay it back when ready. Once the loan and interest are fully repaid in crypto, your Bitcoin is returned to your wallet immediately.
5 Tips for Success
✅ Start Small. Try a small loan first (like $100 on CoinRabbit) to learn the ropes.
✅ Watch Bitcoin’s Price. Keep an eye on market trends. If BTC drops, be ready to add collateral.
✅ Use Secure Wallets. Protect your BTC with a secure wallet and 2FA on platforms.
✅ Plan Repayments. Budget for interest to avoid surprises.
✅ Diversify Opportunities. Consider using the loan for ventures that complement your existing portfolio, increasing both returns and long-term growth potential.
