How to borrow against Bitcoin without selling

Why borrow instead of sell

There are three reasons long-term holders borrow against Bitcoin rather than sell it:

• You keep the upside. If you sell 1 BTC to raise cash and Bitcoin doubles, you've missed that gain. Borrow against it and you still own the coin — and the appreciation.
• You get liquidity without a sale. Cash for a house deposit, a tax bill, business capital, or a large purchase — without unwinding a position you want to hold for years.
• You don't trigger a taxable sale. This is the big one, and it's why crypto-backed loans have become a core tool for tax-efficient liquidity among serious holders. It deserves its own section.

The tax reason, explained

In the US, the IRS treats Bitcoin as property. Selling or otherwise disposing of it realizes a capital gain or loss based on the difference between what you paid (your cost basis) and what you sold it for. Sell coins you've held and appreciated, and you owe tax on the gain.

Taking a loan against those same coins is different. Under current US tax principles, a bona-fide loan is not a sale or disposal — you pledge the Bitcoin as collateral but keep beneficial ownership of it. No sale means no realized gain, and the loan proceeds themselves are not income. Tax practitioners broadly agree that a standard crypto-backed loan from a centralized lender, where you retain ownership of the collateral, is not a taxable event at origination.

That's the headline. But there are three places tax can still bite, and the page wouldn't be honest without them:

• Liquidation is a taxable sale. If Bitcoin falls and your loan-to-value rises past the lender's threshold, your collateral can be sold to repay the loan. The IRS does not treat a forced liquidation any differently from a voluntary sale — you owe capital-gains tax on the gain, even though you didn't choose to sell. So a margin call is both a financial and a tax event. Avoiding it is the whole game.
• Repaying with appreciated Bitcoin can be a disposal. If you ever settle the loan using BTC that has gained value, that can count as a taxable disposition of those coins.
• Interest usually isn't deductible. For personal use, the interest generally isn't tax-deductible. It may be deductible only if you use the borrowed funds for investment or business purposes, under the investment-interest rules (IRC §163) and their limits.

On reporting: a standard loan shouldn't generate a tax form like a 1099-DA, because no sale occurs. (Brokers began reporting digital-asset proceeds on Form 1099-DA for transactions from 2025, and cost basis from 2026 — but those apply to actual sales/dispositions, such as a liquidation, not to taking out a loan.)

How a Bitcoin-backed loan actually works

The mechanics are simple. You send Bitcoin to the lender (or into a smart contract or collaborative-custody vault), and borrow cash against a percentage of its value — the loan-to-value ratio (LTV). Borrow $40,000 against $100,000 of BTC and you're at 40% LTV. You pay interest; when you repay, you get your Bitcoin back.

The number that matters most is the one that can cost you your coins: as Bitcoin's price falls, your LTV rises (the loan stays the same, the collateral shrinks). Cross the lender's margin-call level and you'll be asked to add collateral or pay down the loan; cross the liquidation level and the lender sells enough Bitcoin to bring the loan back in line. Our liquidation calculator shows the exact price your collateral would be sold at for any loan size and LTV, and the full loan guide walks through every term.

What it costs

Rates vary widely by lender and model. On-chain (DeFi) protocols are usually cheapest — often low-to-mid single digits — but you take on smart-contract and tokenized-Bitcoin risk. Centralized (CeFi) lenders that hold native Bitcoin typically run higher, roughly 8–13%+, with some charging origination or admin fees on top. A few price down for larger loans. The only way to know the real cost for your situation is to compare them side by side — see the full lender comparison table, which shows representative APR, max LTV, liquidation level, custody model and fees for every lender we track, and the how-to-compare guide for what each column means.

The risks you take on

Borrowing against Bitcoin is a real financial decision with real downside. The main risks:

• Liquidation. A sharp Bitcoin drop can force the sale of your collateral at the worst possible time — and, as above, trigger a tax bill. Borrowing at a low LTV (say 20–35% rather than the maximum) is the single biggest thing you can do to protect yourself.
• Counterparty & custody risk. With a centralized lender, you're trusting them to hold and return your coins. The 2022 failures of Celsius, BlockFi and Voyager were a hard lesson: lenders that re-lent (rehypothecated) customer collateral blew up. This is why we weight custody model heavily — segregated, non-rehypothecated custody, or collaborative multisig where you hold a key, is far safer than an opaque custodial pool. See how we score it in our risk methodology.
• Variable rates and terms. Some rates float; some terms aren't fully published. Read the fine print and confirm at the source.

How to choose a lender

There's no single "best" lender — it depends on what you're optimizing for:

Whatever you optimize for, compare the same five things across lenders: rate, maximum LTV, liquidation level, custody model, and fees. That's exactly what our independently-verified comparison table lays out, with a source link on every row.

Step by step: borrowing against your Bitcoin

1. Decide how much you need — and borrow less than the maximum. A lower LTV is a bigger safety buffer against liquidation.
2. Model the downside first. Use the liquidation calculator to see the Bitcoin price at which you'd be liquidated for your chosen loan size and LTV. If that price scares you, borrow less.
3. Compare lenders on rate, LTV, liquidation level, custody and fees in the comparison table. Read the risk rating for any lender you're considering.
4. Confirm terms at the source. Rates and terms change; verify on the lender's own site before committing (every row links to it).
5. Borrow, and monitor your LTV — especially in volatile markets. Keep spare collateral or cash ready to top up.

Who this makes sense for — and who should think twice

Borrowing against Bitcoin tends to suit long-term holders who don't want to sell, people who'd otherwise realize a large capital gain, Bitcoin miners needing operating capital against their treasury, and larger holders who want tax-efficient liquidity. It makes less sense if you'd be borrowing at a high LTV, if you'd struggle to add collateral in a crash, or if you simply need cash you can't risk — in which case a forced liquidation could be worse than just selling on your own terms. Borrow against money you can afford to defend.

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