The Best Bitcoin Loan Platforms of 2023

Bitcoin loans are championed as the ultimate hack to financial freedom — but is it too good to be true?


Who is Danny/Shutterstock modified by Blockworks


A bitcoin loan is money, property or goods lent to a borrower using BTC as collateral. It is the permabull’s ultimate hack for using BTC without the FOMO and tax burden that comes with selling.

Although the term “bitcoin loan” might be unclear to some, it doesn’t necessarily mean the loan is made in bitcoin. It is only considered a bitcoin loan if the collateral backing the loan is denominated in BTC

Additionally, these loans are overcollateralized, which means that the value of the collateralized bitcoin exceeds the loan’s value. For instance, some lenders allow borrowers to borrow up to 50% of the deposited collateral’s USD value. As with traditional loans, borrowers receive their collateral back once they pay off the loan and interest in full.

So, what is the point if borrowers get back less than what they put in? This article in our series on crypto and bitcoin loans will explain the appeal and the pros and cons of different bitcoin loan platforms.  

Why get a bitcoin-backed loan?

Like all loans, bitcoin-backed loans aim to make the inaccessible or illiquid value of something more accessible in an open market. Traditional lenders do this by making the value of your future work or endeavors available in cash or a line of credit. 

Bitcoin is more liquid than future work but less accessible than a common medium of exchange. First, only a few merchants and sellers accept bitcoin as payment. But more importantly, because the IRS classifies bitcoin as property, you create a taxable event every time you sell it or exchange it. 

Thirdly, if you view your BTC holdings as an investment, you want to wait to sell until you have made a return. And if you are a bitcoin permabull, you want to avoid selling BTC for as long as possible. So while bitcoin is considered more liquid than most assets such as property and stocks, it is still less liquid than the cash in your pocket. 

How it saves money

A bitcoin-backed loan makes a portion of that investment available without selling bitcoin, thus retaining any potential upside and avoiding a taxable event. There are many instances where this loan would save the borrower money and even make a profit off the initial investment. 

Suppose a borrower uses it to buy a house, flip a used car or even buy more bitcoin. In that case, they can use the investment proceeds to repay the loan without selling any collateral. This strategy is called a leveraged investment and always comes with a degree of risk. For example, if the price of bitcoin drops during the loan duration and the borrower cannot satisfy the collateral requirement, they could lose their initial investment. Borrowers amplify this risk when they use it to buy more bitcoin.  

But if the second investment pays off and the price of bitcoin increases, an investor can pay off the borrowed amount without selling their collateral and paying capital gains. And if bitcoin doubled in price, the investor can avoid selling bitcoin to pay off the loan by using that collateral to take out another bitcoin loan. This process is called rolling your debt, and it can get risky if investors do not save enough capital on the side to account for price volatility. 

When is the best time to buy? 

The best time to buy BTC used as collateral for a bitcoin loan is after a significant market drawdown. Bitcoin’s historical chart reveals that the leading cryptocurrency has suffered severe pullbacks of over 80% after hitting a new all-time high in a bullish market cycle.

Source: Bloomberg

Buying BTC close to a bear market bottom allows investors to maximize the benefits of a bitcoin loan while minimizing the risk of being margin called on their position. However, the difficulty in timing the bottom of a bear market means investors using bitcoin as collateral must be wary of a continued downtrend and hedge against such an outcome. A good rule of thumb is to over-collateralize so that an 80% drawdown from the most recent all-time high won’t liquidate your collateral. Considering a move where the investor uses the credit line to acquire more bitcoin, their portfolio gains substantially as the market trends upwards following a market bottom.

Benefits vs. risks

A bitcoin-backed loan may be a no-brainer given BTC’s historical performance and ability to recover from severe drawdowns. Yet, these loans come with risks that investors must recognize before using the option. This section discusses the benefits and risks when you borrow against BTC.


  • Instant liquidity: Bitcoin is a highly liquid asset compared to other assets such as real estate, bonds, and stocks. A bitcoin loan allows investors to tap into bitcoin’s highly liquid nature within same-day funding. Since loans are overcollateralized, most platforms do not subject users to credit checks and paper filings that could delay access to liquidity as with other financial assets.
  • Greater returns: Since bitcoin loans allow investors to borrow money without spending their bitcoins, they can generate greater returns as the value of their collateral increases. For example, if the value of the collateral doubles, the investors can sell half of it to pay off the loan. This would still incur similar and possibly greater capital gains to selling the same amount of BTC prior to the loan. But in this case, the investor nets a greater profit because they avoided selling BTC at half the price. 
  • Tax benefits: Bitcoin loans can save investors from the tax headaches associated with selling bitcoins to book profits or losses. The borrowing transaction is not a taxable event in most jurisdictions. Users do not need to file tax returns until they choose to sell the BTC collateral in the future.
  • Collateral/token value: During severe market downturns, BTC historically records less volatility compared to other crypto assets. Thus, a loan backed by bitcoin can better weather market pullbacks while saving investors from platform risks associated with using altcoins as collateral.


  • Collateral liquidation: Investors risk losing their BTC collateral if the asset’s price drops substantially below capital requirements. Failure to supply additional collateral upon a margin call will cause the bitcoin loan platform to liquidate deposited BTC to cover the borrowed amount. Bitcoin’s volatile nature also means that such drops could happen quickly, catching investors off guard.
  • Technology risks: Blockchain technology and underpinning technologies such as smart contracts, cross-chain bridge protocols, and currency peg mechanisms are still in their infancy. Users risk losing funds to technology risks such as bugs and security breaches. Even simpler risks, such as transferring funds to the wrong addresses, could lead to permanent losses due to the irreversibility of blockchain transactions.
  • Third-party risks: Investors take on several counterparty risks when they obtain bitcoin loans through a platform that requires the transfer of assets to the centralized entity. The platform could rehypothecate user deposits for personal interests or suffer a security breach. In some cases, the bitcoin loan platform is a decentralized autonomous organization (DAO), meaning investors cannot pursue legal recourse in the event of a loss.

How does it work

When borrowers take out a Bitcoin loan, they use their deposited bitcoins as collateral for the amount they borrow in fiat currency. The loan-to-value (LTV) ratio sets the maximum USD value the borrower can borrow. Also, it determines the price at which the deposited assets may be sold to cover the borrowed amount.

Customers are incentivized to add more collateral to avoid an impending liquidation. For example, consider a user that deposits $1,000 worth of BTC with a 50% LTV. They can borrow up to 50% of the deposited amount, $500 in fiat USD or stablecoins. Assuming the bitcoin loan platform stipulates an 80% LTV threshold for liquidation, the user risks losing their BTC collateral if its value drops by 80% of the borrowed amount (which amounts to $400 in our example).

Bitcoin loan categories

Irrespective of the model used to generate profit from loan issuance, bitcoin loan providers usually fall into two categories: decentralized and centralized platforms. The primary difference is in where the platform stores deposited bitcoins.

DeFi protocols: Investors can borrow against BTC using DeFi protocols built on layer-2 bitcoin network solutions such as RSK, Stacks, Liquid and Fedimints. Users usually retain self-custody while lending or locking assets on autonomous protocols. Here are some popular options on each network.

CeFi lenders: are centralized bitcoin loan issuers that hold custody over user assets. They typically require users to complete an identity verification process and may impose limits on user accounts. Popular cryptocurrency exchanges such as Binance and Bitfinex are examples of CeFi lenders that offer bitcoin loan services.

Where to get a Bitcoin-backed loan

Investors can get a bitcoin-backed loan using any lending platform in this section. Readers must weigh the risks and benefits of each platform and choose one based on their portfolio size and investment objectives.

Verify 21

No tokenomics
No fractional reserve banking as all loans are backed 1:1
No derivatives product to drive irresponsible trading
No rehypothecation of user assets.
No yield product, which adds additional risk to the business.
On-chain proof of reserves via BitGo.
Email & SMS notifications if the threshold is in danger of being breached
No self-custody solution yet
Manual application process and KYC requirements 

Verify 21 embraces the tried and tested model of bitcoin-only backed loans and narrows the main risks for the client down to the liquidation price of the loan and the custody of collateral. Clients maintain complete control over their LTV ratio as they may add or remove collateral to match their loan profile. 

Meanwhile, Verify 21 secures user funds by adopting cold wallets provided by leading custodian service BitGo and proof of reserves scheme to imbibe user trust. Verify 21’s traditional approach poses minimal risks compared to DeFi lenders or centralized entities with a mix of tokenomics and yield generation activities. The company’s business model is more similar to a traditional bank, giving people an extremely secure way to borrow, which does not exist in most parts of the world.

Sovryn Zero

No interest rates. 
Non-custodial contracts handle loan issuance, repayment and liquidations.
No KYC requirements
High collateralization and a Stability Pool mechanism lower the risk of loan default.
Vulnerable to smart contract bugs
Users risk losing funds to an RBTC depeg.

Sovryn Zero is a decentralized trading and lending protocol built on Rootstock (RSK). This bitcoin sidechain relies on the legacy Bitcoin network for security. Users must bridge BTC to RBTC (a pegged version of Bitcoin on RSK) to access the Sovryn Zero protocol and borrow against BTC.

Sovryn Zero requires a 110% over-collateralization for loans, meaning users must always hold a BTC amount higher than they borrow. The protocol issues loans in its ZUSD stablecoin, which users can convert to cash or RBTC after paying the loan origination fee. While Sovryn features an SOV token used for protocol governance, users must not hold them to access Bitcoin loans.

FUJI Finance

No interest rates or origination fees
Lightning Network support for BTC deposits
The platform is non-custodial, meaning users can automatically redeem their capital by repaying their loan.
No rehypothecation as funds are managed on-chain via smart contracts
LBTC and the addition of synthetic assets impose a depeg risk.
Users also run the risk of oracle manipulation and smart contract bugs 

Fuji Finance is a decentralized and non-custodial protocol built on the layer-2 Bitcoin network, Liquid. Fuji enables users to lock Liquid BTC (LBTC) – a version of bitcoin on the Liquid network – as collateral to borrow synthetic assets such as its FUSD stablecoin, stocks, and bonds. The platform mints $1 in FUSD for every $1.5 in BTC deposited, ensuring an over-collateralization of user deposits.

Fuji charges a fixed 0.25% fee on loan repayments but no interest rate or loan origination fees. There is no time limit for repayments. The platform also supports Lightning Network deposits, making fast deposits and withdrawals convenient.


Non-custodial access as users hold keys to escrowed funds.
No KYC requirementsInvestors have greater flexibility on loan offersSupports USD withdrawal via multiple stablecoins 
Interest rates on stablecoin borrowing is higher compared to other bitcoin loan platforms

Hodl Hodl is a non-custodial and peer-to-peer focused cryptocurrency protocol built on Liquid Network. Hodl Hodl offers a unique lending product for users to borrow against BTC in a peer-to-peer fashion. Investors can browse a list of Open Borrow offers or create a new borrowing request with their preferred terms, such as loan duration, interest rate, asset, etc.

Hodl Hodl matches user requests by having the lender and borrower transfer their assets to a multisig address. The borrower commits to repaying the loan and interest within the agreed timeline to receive their BTC held as collateral. They risk liquidation if the position falls below an agreed LTV threshold or they fail to repay the loan within the timeline. 

Unchained Capital

No tokenomics
No rehypothecation of user deposits
Transparent fees and repayment schedule
On-chain proof of reservesIdeal for institutional borrowers with high liquidity demands.
Live client support team
Manual approval process
High-interest rate on USD borrows

Unchained capital is a popular crypto financial services company that offers bitcoin-backed loans alongside its products. Users can access bitcoin loans on Unchained by completing an online application and signing the contracts upon receiving a loan offer from the company.

Unchained capital requires users to pay monthly interest on the loans during its duration, with the principal due to be repaid at the end of the period (usually 6 or 12 months). Users receive a unique address on the blockchain to monitor their collateral and can redeem them upon complete repayment of the loan.

ZEST Protocol

Non-custodial access to bitcoin loans
Borrowers are subject to rigorous checks to lower the possibility of defaults
Audited smart contracts
Zest Protocol provides user support via its Discord community.
Yield generation activities mean greater risk for lenders.
Investors risk losing collateral to an sBTC depeg.

Zest Protocol brands itself as the first on-chain bitcoin capital market for institutional borrowers. Zest is built on the Stacks blockchain and provides access to bitcoin loans through a liquidity pool seeded by lenders seeking yield on BTC. Lenders receive periodic payouts (between 4-7%) APY for providing liquidity.

Investors must convert BTC to sBTC (Stacks pegged bitcoin version) to interact with the Zest Protocol. At the time of writing, Zest Protocol is available in early access following the completion of security audits and the testnet phase. 

Coinbase Bitcoin Loans 

Secure storage of user funds using industry-standard practice.
Coinbase offers a competitive 8% interest rate of USD borrows
Only interest payment is mandated during loan durationInvestors can borrow anywhere between $100,000 to $1,000,000 depending on their portfolio size
Users can only borrow up to 30% of deposited BTC Lack of self-custody 

Popular cryptocurrency exchange Coinbase offers a bitcoin loan service, allowing users to borrow up to 40% of their collateral amount in USD. Users can instantly withdraw the credit line via PayPal or ACH wire transfers.

Coinbase loan users may opt for a 12-month fixed term with the option to pay only the interest rate during the loan duration ($10 minimum). They can also extend the fixed term for 12 months, with full repayment only mandatory at the end of the tenure.

Making the most of bitcoin loans

In conclusion, bitcoin loans offer a promising way for investors to increase their BTC holdings, acquire new assets, or address cash flow needs while maintaining their investment’s potential upside. However, the permabull mindset and dogma that bitcoin will only ever continue to increase in price can lead many to take extreme risks with these financial instruments. Even if bitcoin wins the world over as the supreme reserve asset for nation states, its volatile price swings can still leave many bitcoin backed loan borrowers out to dry. Users must understand the risks and thoroughly research before selecting a bitcoin loan platform. 

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