Last Updated on June 20, 2025 by Olga Davis
Summary: How To Use Crypto As Collateral
- Borrowing crypto means receiving digital assets as a loan, often in stablecoins like USDT or USDC.
- You can borrow through CeFi, DeFi, or peer-to-peer platforms, with or without collateral.
- Using crypto as collateral involves locking assets like BTC or ETH to secure a loan.
- This lets you access liquidity without selling your crypto or triggering taxable events.
What Does It Mean to Borrow Crypto?
Borrowing crypto means getting digital assets as a loan, allowing you to access funds without selling your holdings. This can help with liquidity, investing, or expenses while keeping exposure to crypto.
There are several ways to borrow crypto:
- Collateralized loans: You use your crypto as collateral to secure the loan. This is common and usually has lower interest rates. Failure to repay can lead to liquidation of collateral.
- Unsecured loans: Loans without collateral, rarer and with higher rates, often requiring credit checks.
- Peer-to-peer lending: Borrowing directly from other users, with varying terms and collateral requirements.
- Margin trading and credit lines: Borrowing crypto to increase trading positions or via credit lines offered by platforms.
How to Use Crypto as Collateral?
Using crypto as collateral means locking your digital assets to secure a loan without selling them. You receive funds while your crypto remains yours. If you don’t repay, the collateral may be liquidated to cover the crypto loan. This service is offered on both centralized and decentralized platforms.
How to Use Crypto as Collateral? Step 1: Choose a Platform
Start by selecting a platform that supports crypto-collateralized borrowing. Key things to compare:
- Collateral options: BTC, ETH, SOL, stablecoins
- Supported currencies for payout: USDT, USDC, fiat
- LTV (Loan-to-Value) limits
- Reputation, security audits, and insurance coverage
| Platform | Type | Max LTV | Key Focus |
|---|---|---|---|
| CoinRabbit | CeFi | 90% | 300+ supported assets as collateral |
| Unchained Capital | CeFi | 70% | Bitcoin loans |
| Crypto.com | CeFi | 80% | Multi-service platform |
| Aave | DeFi | 85% | Community-driven governance |
How to Use Crypto as Collateral? Step 2: Deposit Collateral
Once registered (or connected via wallet), you’ll need to deposit the crypto asset you want to use as collateral.
- Most platforms accept BTC and ETH as collateral. Some also support assets like SOL, MATIC, or stablecoins such as USDC. Some platforms, such as CoinRabbit, support a wide range of assets — over 300 options — giving users more flexibility when choosing collateral.
- Your deposited collateral is locked until you fully repay the borrowed amount.
- Collateral may be stored custodially (CeFi) or in smart contracts (DeFi).
How to Use Crypto as Collateral? Step 3: Select Loan Terms
You now choose:
- Loan amount (based on the LTV ratio)
- Loan currency (e.g., USDT or USDC)
- Repayment schedule: fixed term (e.g., 7–90 days) or open term (repay anytime)
📌 LTV Example:
Deposit 1 ETH ($3,000). At 50% LTV, you can borrow $1,500 in stablecoins.
How to Use Crypto as Collateral? Step 4: Monitor Your Loan Health
Crypto is volatile — so the value of your collateral can drop quickly.
- If your LTV rises past a threshold, the platform may liquidate part of your collateral.
- Usually platforms send margin call notifications.
- You can add more collateral or partially repay to lower LTV.
How to Use Crypto as Collateral? Step 5 : Repay The Loan
To close the loan and unlock your collateral:
- Repay the principal and any accrued interest
- Once repaid in full, your collateral is released
Borrow Crypto With CeFi vs DeFi
| Feature | CeFi (CoinRabbit) | DeFi (Aave, Compound) |
|---|---|---|
| Custody | Centralized | Non-custodial (you keep wallet access) |
| Credit checks | – | – |
| Payout | Stablecoins, Bitcoin, fiat options | Crypto only |
| Collateral options | 300+ assets | Dozens, including LP tokens |
| Rates | Fixed | Variable, market-driven |
| Automation | Semi-automated | Fully on-chain |
| Use cases | Trading, tax efficiency, real estate purchases, business funding, diversification, | Leverage, yield loops, arbitrage |
How to Borrow Crypto for Real-World Expenses
You can use crypto as collateral to access spendable funds without selling your assets. By locking BTC, ETH, or stablecoins on a lending platform, you receive stablecoins like USDT, which can be converted to fiat and used for real-world expenses — rent, taxes, business costs.
Platforms like CoinRabbit make this possible with instant loans, no credit checks, and built-in tools like a crypto wallet and crypto exchange — so you can borrow, manage, and swap assets in one place. It’s one of the clearest ways crypto moves from digital value to real-world utility — letting you spend without exiting the market.
How to Borrow Crypto for Trading and Leverage
To borrow crypto for trading, deposit collateral (e.g. BTC) and borrow assets like USDT or ETH to open leveraged positions. CeFi platforms (e.g. CoinRabbit) allow using borrowed funds for margin or futures. DeFi protocols (e.g. Aave) let users borrow and redeploy into LPs or yield farms.
Use cases:
- Leveraging long/short strategies
- Arbitrage across DEXs
- Gaining exposure without selling core holdings
Conclusion: Borrow Crypto with Confidence
Today, anyone can borrow crypto and use it as collateral in a smart way — not just to survive bear markets, but to unlock capital, delay taxes, or increase flexibility in how assets are deployed. Start leveraging your crypto assets today and take control of your financial future with confidence!
