Crypto-backed lending moved into mainstream products this year. Coinbase and Better made bitcoin-backed mortgages generally available in August. MARA borrowed $600 million against pledged coins. Aave lists tokenized gold as collateral.
The pitch is consistent everywhere: keep your asset, get liquidity, avoid a taxable sale.
The costs are consistent too, and they are less advertised.
The Core Trade
Selling crystallizes a gain or loss and ends your exposure. Borrowing against the asset keeps the exposure and adds a liability.
If the asset rises, you keep upside you would have forfeited. If it falls, you still owe the loan, and the collateral securing it is worth less.
That is a leveraged long position. It can be the right trade. It is not a way to avoid taking a view on price.
Loan-to-Value Is the Number That Governs Everything
LTV is the loan amount divided by the collateral value. A $40,000 loan against $100,000 of bitcoin is 40% LTV.
Crypto lenders demand far more collateral than traditional ones because the collateral moves. Coinbase and Better require pledged bitcoin worth at least 250% of the down-payment loan, meaning $100,000 in bitcoin supports roughly $40,000 borrowed.
Overcollateralization at that level is not a fee. It is capital you cannot use for the life of the loan.
Two thresholds usually exist. The initial LTV you must meet to borrow, and a maintenance LTV that triggers a margin call or liquidation if breached.
Read the Margin Call Language Carefully
Marketing frequently says no margin calls. The accurate version is usually narrower.
Better’s terms indicate day-to-day bitcoin price changes do not affect mortgage terms and there are no margin calls based solely on price movement. That is genuinely different from typical crypto lending, where price-triggered liquidation is standard.
It is not the same as saying collateral can never be called. The 250% requirement is what makes the promise workable, because the lender has priced in a large drawdown before the position becomes a problem.
The questions to ask any lender are what happens at extreme declines, on default, and on early repayment. Those provisions vary and are rarely in the headline.
Rehypothecation Is the Underdiscussed Risk
When you pledge collateral, someone holds it. Whether they can use it is a separate question.
Rehypothecation means the lender lends out or reuses your posted collateral. It improves their economics and introduces a counterparty risk you did not agree to explicitly.
Several 2022 failures traced to exactly this. Customer collateral had been reused, and when the chain of obligations broke, the assets were not there.
Coinbase’s documentation states pledged crypto transfers to the lender’s custodial account on Coinbase Prime and is returned in full once the mortgage is repaid. That is a clear custody statement, and it is the kind of language worth finding before signing anything.
If a lender’s terms do not address rehypothecation, assume it is permitted.
How Institutions Use It
The corporate version is instructive because the disclosures are public.
MARA pledged 18,750 BTC for $600 million rather than selling more coins, at a weighted rate around 7.56%. The maintenance ratio was not disclosed, meaning no outside party knows the price at which forced liquidation begins. Optimisus covered that in the piece on the undisclosed liquidation price.
Strategy went the other way, selling coins in four separate weeks to fund preferred dividends, documented in the piece on it moving its own cash target.
Borrowing and selling are the two options. Both have consequences and neither is free.
The DeFi Version
On-chain lending automates all of this. Liquidations execute by smart contract when health factors fall below a threshold, at any hour, without a phone call.
That is faster and more transparent than the institutional version, and less forgiving. There is no negotiating with a contract.
Concentrated leveraged positions on lending protocols with health factors close to their liquidation threshold have been a recurring feature of 2026, and they amplify drawdowns when they unwind.
The Checklist
Before borrowing against crypto: know your initial and maintenance LTV, know exactly what triggers a call, know who holds the collateral and whether they can reuse it, and know the interest rate and how it is set.
Then run the number that matters. At what price does this position become a problem, and can you cover it without selling the collateral?
The trading risks around leveraged positions are covered in our day trading guide.
If the answer requires the asset to not fall, you have not hedged anything. You have added leverage to a position you already had.
Sources
- Coinbase Help, crypto-backed mortgages, collateral and custody terms — https://help.coinbase.com/en/coinbase/mortgages/crypto-backed-mortgages
- The Block, Coinbase and Better make token-backed mortgages generally available — https://www.theblock.co/news/business/2026-08-26-coinbase-better-make-token-backed-mortgages-generally-available-412810
- Crypto.news, MARA pledges 18,750 BTC for $600M in new loans — https://crypto.news/mara-pledges-18750-btc-for-600m-in-new-loans/
- CoinMarketCap, Aave RWA collateral and lending market coverage — https://coinmarketcap.com/top-stories/6a888598d927ed2cfe7a78ff/
This is not financial advice.
Optimisus covers crypto and technology news for readers who want the detail behind the headline.
