What is crypto lending, and how does it work?

Crypto lending used to be a fringe idea. Now, in 2025, it’s part of how many long-term crypto holders manage their wealth. Bitcoin, Ethereum, and even stablecoins aren’t just digital assets you buy and hold — they’re assets you can use to access liquidity or earn rewards along the way

That shift leaves many investors asking something deeper:

What exactly is crypto lending, and why do people use it?

Let’s break it down in a way that feels clear, practical, and aligned with how the market really works today.

Why do people care about crypto lending in 2025?

Crypto lending appeals to people who believe in their digital assets long term but also want financial flexibility.

Selling Bitcoin every time you need cash breaks your strategy. It ends your exposure to future price growth, may trigger taxable events depending on where you live, and disrupts the long-term plan you’ve built.

Crypto lending offers a different approach: unlock liquidity without selling what you own.

It mirrors a strategy wealthy investors have always used — leveraging the value of their assets rather than liquidating them.

So what is crypto lending?

Crypto lending lets you use your digital assets as security to access funds, similar to a collateral-backed credit line.

You start by adding crypto to a digital asset platform. The crypto platform then assigns you a borrowing limit based on its value, and you can unlock cash or stablecoins without selling your assets.

How does borrowing work?

Borrowing against crypto follows a clear flow:

1. You add digital assets such as Bitcoin as security.
2. The platform evaluates their value and offers you access to a smaller amount of credit. For example: add $100,000 in Bitcoin → access $50,000 in credit.
3. Your “loan-to-value” (LTV) ratio shows how much you’ve borrowed relative to the value of the crypto you added. In that case, your LTV is 50%.

If the market stays stable or rises, your position becomes safer. If the market falls, your LTV goes up, meaning you’re using a larger portion of your security to support the same amount of credit.

Most platforms notify you in advance if your LTV approaches a limit. At that point, you can either add more crypto to increase your collateral or repay part of your outstanding balance. 

If you don’t act and the market continues falling, the platform may automatically use a small portion of your crypto to repay part of the credit. This keeps the arrangement financially balanced.

How do repayment and interest actually work?

If you’re thinking about borrowing against your crypto, two questions usually come up right away:

“Do I have to pay this back on a fixed schedule?”  and “How does the interest get charged?”

Here’s the simplest way to think about it.

1. Repayment is usually flexible

With crypto-backed credit lines, you’re not locked into a traditional monthly payment schedule. Platforms like Nexo let you repay:

• Whenever you want
• In any amount
• At your own pace

There’s no “missed payment” in the traditional sense because there’s no set due date. What matters is that your credit balance stays supported by enough collateral.

Think of it like borrowing against your own asset instead of taking a bank loan — you’re in control of the timing.

This is especially helpful if your income isn’t perfectly regular or if you’re using the credit line as part of a longer-term strategy.

2. Interest accrues only on what you actually borrow

Another common question:

“If I secure the credit line with my crypto, do I pay interest on the whole collateral?”

No. You only pay interest on the amount you actually withdraw, not the total value of the crypto you add.

Example:

• You add 1 BTC worth $100,000.
• You borrow $50,000.

You only pay interest on $50,000 — not on the full $100,000.

The interest accrues daily, making it easy to track. If you repay part of the balance, the interest owed naturally decreases.

3. You can repay in multiple ways

People also ask:

“Do I have to repay in the same currency I borrowed?”

Platforms like Nexo give you options:

• Repay in the currency you borrowed (like stablecoins)
• Repay using other crypto you hold
• Repay using funds from your bank account

That flexibility is part of why crypto lending has grown — it adapts to how people already manage their digital assets.

In both traditional and crypto lending, your asset isn’t sold when you borrow against it — it’s held as security while you access funds. The interest you pay is simply the cost of using that liquidity without giving up the asset itself.

And because crypto markets operate around the clock, you can adjust your collateral, repay early, or track your position in real time, giving you more visibility and flexibility over your borrowing than many people are used to. 

For many long-term holders, that tradeoff is worth it. They keep their exposure to future price growth, stay invested, and still access funds when they need them.

A realistic example: borrowing against 1 BTC

Let’s walk through a simple scenario:

• You add 1 BTC, worth $100,000, into your account.
• You choose to access $50,000 in credit.

If Bitcoin rises to $120,000

• Your LTV drops (you’re using less of your asset to secure the same amount of credit).
• Your position becomes more comfortable.
• You may even unlock more borrowing capacity.

If Bitcoin falls to $80,000

• Your LTV rises.
• The platform may ask you to add more collateral or repay part of your credit.
• If the price falls sharply and passes a threshold, the platform may automatically repay a portion using some of your added Bitcoin.

Every credit line has a maximum loan-to-value (LTV) limit — a point where the collateral no longer covers the credit safely if the market keeps dropping.

This limit is the “threshold,” and if your LTV approaches it, the platform begins taking automated steps to restore balance.

This process protects both sides and keeps things financially balanced. It’s not a penalty — it’s simply how secured credit works when the market moves.

Why do people borrow instead of selling?

Borrowing against crypto is ultimately a wealth choice, not a speculative one. The most common reasons include:

1. Staying invested long-term

Selling Bitcoin means giving up future upside. Borrowing keeps you exposed to potential growth.

2. Access to liquidity

For big purchases, cash flow, or new investments — without selling core assets.

3. Flexible repayment

Many platforms, including Nexo, let you repay at your own pace. No fixed schedule unless you choose one.

4. Avoiding a taxable event

Selling crypto may create a taxable event in some jurisdictions. Borrowing allows long-term holders to access liquidity without immediately selling their assets, which can be useful for strategic planning.

Why crypto lending feels more mature in 2025?

Several shifts made crypto lending more structured and predictable:

• Clearer frameworks in major financial regions
• Stronger custody standards
• Better transparency around risk
• More tools for users to track and manage LTV
• A larger base of long-term holders
• Rising institutional interest in using crypto as productive collateral

Crypto lending is becoming part of modern wealth management.

Where Nexo fits.

Nexo offers a crypto-backed credit line that lets you use your digital assets as collateral to access funds. Instead of selling your Bitcoin, Ethereum, or other assets, you add them to your account, and Nexo instantly calculates how much credit you can unlock based on their current value.

One of the platform’s strengths is that you can borrow against your entire crypto portfolio.

You can combine BTC, ETH, and more than 90 supported assets under a single Credit Line, allowing you to access liquidity based on the collective value of your holdings — not just one asset. This helps users make the most of diversified portfolios, rather than relying on a single asset as security.

Approval is immediate because your crypto serves as the security. There are no credit checks, and no fixed repayment schedule — you repay whenever it works for you, in part or in full, as long as your credit line remains supported by enough collateral.

Interest rates start from 2.9% annually, depending on your Loyalty Tier and the loan-to-value (LTV) ratio you choose to maintain.

Nexo also provides tools to track your LTV in real time, set alerts, and see how market movements affect your position.

If prices shift, you can add more collateral, repay part of your balance, or let the system automatically settle a portion using the crypto you’ve added.

It’s a flexible, structured way to access liquidity while staying invested — designed for people who want to manage their digital assets with the same clarity and control they expect from traditional finance.

The takeaway

Crypto lending goes beyond a fancy feature. It’s a mindset.

It’s about using what you own strategically, whether you want liquidity, daily rewards, or simply a way to make your long-term holdings work for you.

It blends traditional finance logic with the flexibility of digital assets: a system built around opportunity, responsibility, and long-term thinking.

In 2025, that’s what modern crypto wealth management looks like.