Is borrowing against Bitcoin a good idea?
Feb 10•7 min read
When Bitcoin prices fall, many holders face a familiar dilemma. Do you sell now and lock in losses — or look for another way to cover expenses while keeping your BTC?
That question is exactly why interest in borrowing against Bitcoin tends to rise during market downturns. Instead of selling at lower prices, some holders explore crypto-backed borrowing as an alternative.
Let’s break down how borrowing against Bitcoin works, why people consider it, and what trade-offs you should understand before deciding.
What does it mean to borrow against Bitcoin?
Borrowing against Bitcoin means using your BTC as collateral to secure a loan.
Instead of selling your Bitcoin, you pledge it to a platform and receive funds in return — usually cash or stablecoins. Your Bitcoin isn’t sold. It’s temporarily locked as collateral while the loan is active.
Once you repay what you borrowed (plus any interest), your Bitcoin is fully unlocked and available again.
In simple terms:
- You keep ownership of your BTC
- You access liquidity today
- Your exposure to Bitcoin’s price remains intact
This model is often referred to as a Bitcoin-backed loan or crypto-backed borrowing.
How borrowing against Bitcoin works, step by step
Choose a platform that offers crypto-backed borrowing
Not all crypto platforms support borrowing. You first need one that allows you to borrow against your digital assets.
Add Bitcoin to your account
You can either buy Bitcoin directly on the platform or transfer BTC you already own from another wallet.
Add Bitcoin as collateral
Collateral is something valuable you temporarily set aside to secure a loan. When you use Bitcoin as collateral, it isn’t sold — it’s locked while you borrow and unlocked once you repay.
Borrow a portion of its value
The amount you can borrow depends on the loan-to-value ratio (LTV). For example, borrowing $2,000 against $10,000 worth of BTC results in a 20% LTV.
Receive funds
Funds are typically issued in stablecoins like USDC, which you can use for expenses, transfers, or other needs.
Monitor your LTV
Because Bitcoin prices move, your LTV can change. If prices fall, you may need to add collateral or repay part of the loan to stay within limits.
Repay flexibly
Once the loan is repaid, your Bitcoin is released and fully accessible again.
The key point: your Bitcoin is not sold unless you choose to sell it.
Why do people borrow against Bitcoin instead of selling?
Borrowing against Bitcoin becomes especially relevant during market downturns. Here’s why.
Avoid locking in losses
Selling during a price drop turns a temporary decline into a realized loss. For long-term holders, that can feel like exiting at the worst moment. Borrowing allows access to liquidity without closing the position.
Keep exposure if prices recover
Many holders believe Bitcoin’s value may recover over time. Borrowing keeps that exposure intact, whereas selling removes it entirely.
Handle real-world expenses
Market conditions don’t pause everyday life. Taxes, bills, business costs, or unexpected expenses still need to be covered — regardless of price action.
Maintain flexibility
Selling is final. Borrowing is reversible. As long as the loan is managed responsibly, borrowers retain more optionality over what happens next.
Defensive borrowing vs. borrowing with conviction
Not everyone borrows against Bitcoin for the same reason.
Defensive borrowing
This is the most common use case.
The goal is liquidity, not profit
LTVs tend to be conservative
Repayment is planned from the start
It’s often used to avoid selling during volatility or to bridge short-term needs.
Conviction-based borrowing
Some experienced holders borrow to increase their Bitcoin exposure during downturns, buying more BTC with borrowed funds.
This approach:
Amplifies potential upside
Also amplifies risk if prices fall further
It requires careful risk management and isn’t suitable for everyone. Understanding this distinction helps clarify whether borrowing aligns with your goals.
The risks to understand before borrowing
Borrowing against Bitcoin is not risk-free. Key risks include:
Price volatility — falling prices increase LTV
Margin calls — additional collateral or repayment may be required
Forced liquidation — if LTV limits are exceeded and not addressed
Because of this, borrowing works best when:
LTVs are kept conservative
Positions are monitored regularly
Borrowers have a clear repayment plan
This is not a “set and forget” strategy.
How price changes affect your loan-to-value (LTV)
When you borrow against Bitcoin, one number matters more than any other: your loan-to-value ratio (LTV).
LTV compares how much you’ve borrowed against the current value of your Bitcoin collateral.
Because Bitcoin’s price moves, your LTV can change over time — even if you don’t borrow more or repay anything.
Here’s how that works in practice.
Scenario 1: Bitcoin’s price goes up
If the price of Bitcoin rises after you’ve taken a loan, your situation generally becomes more comfortable.
For example:
You borrow $2,000 using $10,000 worth of BTC as collateral
Your initial LTV is 20%
If Bitcoin’s price increases, your collateral is now worth $12,000:
Your borrowed amount stays the same
Your LTV drops to around 17%
What this means for you:
Your position becomes safer
You have more buffer against volatility
You may gain the flexibility to borrow more or repay on your own terms
In simple terms, rising prices give you more breathing room.
Scenario 2: Bitcoin’s price goes down
If Bitcoin’s price falls, the opposite happens.
Using the same example:
You borrowed $2,000 against $10,000 worth of BTC
Your LTV started at 20%
If Bitcoin’s price drops, your collateral is now worth $8,000:
Your borrowed amount is still $2,000
Your LTV increases to 25%
What this means for you:
Your margin for error shrinks
You may be asked to add more collateral or repay part of the loan
If the price continues to fall and no action is taken, forced liquidation becomes possible
This is why borrowing against Bitcoin requires active monitoring, especially during volatile markets.
Why LTV matters so much
LTV is what keeps a crypto-backed loan balanced.
Lower LTVs = more flexibility and lower risk
Higher LTVs = less buffer and more pressure during price swings
That’s why many borrowers choose to borrow conservatively, leaving room for Bitcoin’s price action.
Understanding how LTV moves, not just how borrowing works, is key to deciding whether borrowing against Bitcoin is a good idea for you.
Borrowing in practice
On platforms like Nexo, crypto-backed borrowing is designed to be flexible.
You can:
Choose how much to borrow
Get a crypto-backed loan from 2.9% annual interest*
Repay in part or in full, on your own schedule
Pick from over 100 supported digital assets to borrow against
When borrowing against Bitcoin may not make sense
Borrowing may not be a good fit if:
You need funds long term with no clear repayment plan
You’re already highly exposed to market volatility
You’re uncomfortable monitoring price movements and LTV levels
In some cases, selling a portion of holdings may be the simpler and safer choice.
Frequently asked questions
Do you borrow Bitcoin itself?
No. You typically borrow stablecoins (like USDC), while your Bitcoin stays in place as collateral.
How much can you borrow against Bitcoin?
This depends on the platform and your loan-to-value ratio (LTV). Lower LTVs generally mean lower risk because you have more buffer if Bitcoin’s price drops.
A common conservative approach is to keep LTV around 20%. For example:
If you have $10,000 worth of Bitcoin as collateral, a 20% LTV would mean borrowing about $2,000.
If you have $25,000 worth of Bitcoin as collateral, a 20% LTV would mean borrowing about $5,000.
Is borrowing against Bitcoin better than selling?
It depends on your goals, risk tolerance, and situation. Borrowing can help you keep exposure to Bitcoin while accessing funds, but it adds risk if prices drop further. Selling is simpler and removes that risk — but it also removes your exposure to future price moves.
What happens if Bitcoin’s price drops after I borrow?
If Bitcoin’s price falls, the value of your collateral goes down while the amount you borrowed stays the same. This increases your loan-to-value ratio (LTV).
If LTV rises too much, you may need to add more Bitcoin as collateral or repay part of the loan to bring it back down.
If no action is taken and prices continue to fall, forced liquidation becomes possible. This is why many borrowers choose conservative LTVs and monitor their positions during volatile markets.
Does borrowing against Bitcoin make sense in a down market?
For some holders, it can — especially if selling at lower prices feels like locking in losses and they need access to cash for short-term needs. Borrowing can offer flexibility, but it also adds risk if prices fall further.
Whether it makes sense depends on how much you borrow, how closely you can monitor your loan, and how comfortable you are with market volatility.
These materials are for general information purposes only and are not intended as financial, legal, tax, or investment advice. Digital assets are subject to significant risk, including price volatility. The content of this article is intended solely for general informational and educational purposes. It does not constitute and should not be relied upon as financial, investment, legal, accounting, or tax advice, or as a recommendation to buy, sell, or hold any cryptocurrency or other financial instrument. Trading and investing in digital assets such as Bitcoin and other cryptocurrencies are inherently speculative and involve a substantial risk of loss. Always do your own research and consult a qualified professional before making any financial decisions.
*The 2.9% borrowing rate applies to Platinum Loyalty Tier clients when the Credit Wallet LTV is below 20%. The Platinum Tier requires maintaining at least 10% of your portfolio balance in NEXO Tokens. Rates, eligibility, and availability may vary by jurisdiction and may change — check support.nexo.com for current terms.