What is a crypto loan?

A crypto loan is a type of secured loan where you use your cryptocurrency holdings as collateral to borrow another asset, usually a stablecoin or fiat-pegged token. This allows you to unlock liquidity without having to sell your crypto, which means you can continue to benefit from potential price increases while still getting access to funds.

Instead of undergoing traditional credit checks or lengthy approval processes, crypto loans are based primarily on the value of your collateral. Key terms typically include a loan-to-value (LTV) ratio, which determines how much you can borrow relative to your collateral, interest rates, and liquidation thresholds - the point at which your collateral may be sold if its value drops too low.

Example:
Let’s say you own 1 BTC, currently worth $60,000. You don’t want to sell it because you believe its value will increase, but you need access to cash. You could use that BTC as collateral to borrow $30,000 (with a 50% LTV ratio). As long as the value of your BTC stays above the liquidation threshold, you can repay the loan over time and eventually get your full BTC back.

Crypto loans are a useful tool for accessing liquidity, managing tax implications, or funding short-term needs without giving up ownership of your crypto assets.