Guide · Loans
Borrow against bitcoin instead of selling it?
To borrow against bitcoin instead of selling it is to keep the position and take on a debt secured by it. You keep the upside and pay interest, but a price fall can trigger a margin call and a forced sale, and the collateral is exposed to the lender. Selling raises cash now and ends both exposures, but any gain is generally taxed in the year of sale.
Key takeaways
- A loan raises only part of the value. Published starting loan-to-value (LTV) ratios in the table below run between 20% and 75%, and cluster at 50% (published terms, September 2026).
- Borrowing keeps full price exposure and adds debt. In the worked example below, borrowing leaves you US$500,000 ahead of selling if bitcoin rises 50%, and US$250,000 behind if it falls 25%.
- The two routes diverge by the price move, not the tax. On the worked example below, borrowing ends about US$500,000 ahead of selling if the price rises and about US$250,000 behind it if the price falls far enough to liquidate.
- A liquidation is a sale. It can crystallize a taxable gain at a low price, with the proceeds going to the lender.
- Selling ends the counterparty question. A loan leaves the collateral subject to the lender’s custody terms, and in the Celsius bankruptcy objecting retail borrowers’ collateral was held to be estate property.
Borrowing and selling side by side
The two routes answer the same need, cash from a bitcoin position, with opposite trade-offs. The table sets them out factor by factor.
| Factor | Borrow against bitcoin | Sell bitcoin |
|---|---|---|
| Cash raised | A fraction of the collateral’s value, set by the lender’s starting LTV | The sale price of the bitcoin sold, less trading costs and any tax on the gain |
| Keeping upside | You keep all of it on the pledged bitcoin | You give it up on the bitcoin sold |
| Downside | You keep all of it, on top of a debt that does not fall with the price | Ends on the bitcoin sold |
| Interest cost | Interest and fees for the whole term, paid monthly or accrued into the balance, as the lender sets | None |
| Liquidation risk | A price fall can trigger a margin call, then a forced sale at a time the lender’s terms decide | None: you choose when and what to sell |
| Tax event timing | Often none when the loan is taken; a liquidation or certain lender structures can be a disposal | Generally a disposal now, with any gain taxable for that year |
| Counterparty risk | Lasts as long as the loan: custody, rehypothecation rights and lender insolvency | Ends at settlement of the sale |
| Exit | Repay the loan to release the collateral, or refinance at maturity | Buy back later, at the market price then |
| General description of both routes; the terms of any loan are set only by the lender. Tax depends on where you are taxed and on the loan terms. | ||
How much cash each route raises
Selling a bitcoin raises its price, less the desk’s spread or the exchange’s fees and any tax on the gain. Borrowing against it raises only the starting LTV times its value, because the lender keeps a cushion between the loan and the collateral.
The cushion is visible in what lenders publish. The table records the starting LTV, the margin call and the liquidation level that seven lenders state on their own pages. It is a dated description, not a ranking, and each firm’s full terms are on its site.
| Lender (page) | Starting LTV | Margin call or top-up | Liquidation | Cure window |
|---|---|---|---|---|
| Ledn (bitcoin-backed loans) | 50% typical | Alerts at 70% and 75% | Automatic at 80% | Not stated |
| Xapo Bank (borrow) | 20%, 30% or 40% | Add collateral or repay above 65% | Sells collateral at 80% | Not stated |
| Arch (help centre) | Up to 60% | 70% | Partial, at 80% | 24 hours |
| Figure (FAQ margin table) | 50%, or up to 75% | 80% or 85% | Automatic at 90% | 48 hours |
| Unchained (business loans) | 200% collateral to principal (about 50%) | Below 150% (about 66.7%) | At 120% (about 83.3%) | 24 hours |
| SALT (LTV guide, 26 March 2026) | 30%, 50% or 70% | 83.33% (warning at 75%) | “Margin event” at 90.91% | Not stated |
| Milo (crypto-backed loan) | Pledge 2x the loan (about 50%) | 67% | In the loan documents | Not stated |
| Ranges lenders published as of September 2026; terms depend on the lender, the collateral and the borrower, and are set only by the lender. Sources: each firm’s own pages, accessed 19 September 2026 (listed below). Unchained states collateral-to-principal ratios; the LTV equivalents are our arithmetic. | ||||
So a holder who needs US$1,000,000 and borrows at 50% LTV pledges about US$2,000,000 of bitcoin. A holder who sells needs to part with about US$1,000,000 of it, plus enough to cover costs and any tax. Naming these firms describes what they publish; it implies no relationship, and how we are paid is disclosed separately.
A worked example: US$1,000,000 from 20 bitcoin
Take a holder with 20 bitcoin at an assumed price of US$100,000, worth US$2,000,000, who needs US$1,000,000. Route one borrows US$1,000,000 against all 20 bitcoin at 50% LTV. Route two sells 10 bitcoin and keeps 10 unencumbered. Assume a margin call at 70% LTV and liquidation at 80%, levels within the published ranges above.
- Margin call price: US$1,000,000 ÷ (70% × 20) = about US$71,429, a fall of 28.6%.
- Liquidation price: US$1,000,000 ÷ (80% × 20) = US$62,500, a fall of 37.5%.
- Interest: each percentage point a year on US$1,000,000 is US$10,000. If the lender adds accrued interest to the balance, each US$10,000 raises the liquidation price by US$625.
| Bitcoin price at the end of the term | Borrow: 20 BTC less the US$1,000,000 debt | Sell: 10 BTC kept |
|---|---|---|
| US$150,000 | US$2,000,000 | US$1,500,000 |
| US$100,000 | US$1,000,000 | US$1,000,000 |
| US$75,000 (LTV 66.7%) | US$500,000 | US$750,000 |
| US$50,000 (liquidation level passed at US$62,500) | Nil if nothing had been sold | US$500,000 |
| Illustrative arithmetic before interest, fees, trading costs and tax. In both routes the US$1,000,000 of cash has been raised and spent. The 70% and 80% levels are assumptions within the published ranges; actual terms are set only by the lender. | ||
Borrowing keeps twice the bitcoin exposure of selling half. Above US$100,000 it leaves you ahead by 10 bitcoin times the rise, less interest. Below, it leaves you behind by the same amount, and past US$62,500 the lender can force a sale. At US$50,000, what is left depends on whether the lender sold enough to restore a target LTV or enough to repay the loan, and on its fees.
Two further points decide the comparison. First, the break-even: before tax, borrowing beats selling only if the extra 10 bitcoin rise by more than the loan’s interest and fees, so each percentage point of interest needs a rise of about US$1,000 per bitcoin. Second, the path matters, not just the end price: a fall through US$62,500 in the middle of the term can trigger liquidation even if bitcoin has recovered by maturity.
Risk
Risks of borrowing instead of selling
- Margin calls and forced liquidation. A fall in the bitcoin price raises the LTV. Past the lender’s margin call level you must add collateral or repay part of the loan within the cure window (24 or 48 hours in the terms above); past the liquidation level the lender sells collateral without waiting.
- Custody, rehypothecation and counterparty risk. Your bitcoin sits with the lender or its custodian for the whole term. Celsius’s retail loan terms let it rehypothecate collateral, and after its Chapter 11 filing in July 2022 the court held that collateral posted by retail borrowers who objected to the plan was property of the estate (9 November 2023). Lenders publish different custody models, from segregated custody to 2-of-3 multisig.
- Tax on a liquidation. A forced sale of collateral is generally a taxable disposal, even though taking the loan usually is not. The gain can fall due at a low price, with the proceeds already applied to the debt.
- Interest and refinancing. Interest runs for the whole term, and a loan that reaches maturity must be repaid or refinanced on the terms available then.
The mechanics are covered in bitcoin loan margin calls and bitcoin loan rehypothecation.
When selling is the better choice
Selling is often the more prudent route. It fits when one or more of these is true.
- The need is permanent. Loans run for fixed terms, commonly 12 months in the terms above. If the only way to repay is to sell the bitcoin later, a loan adds interest and liquidation risk to a sale that happens anyway.
- You could not meet a margin call. Without spare bitcoin or cash to post within a 24- or 48-hour cure window, a price fall becomes a forced sale on the lender’s timing.
- The position is already too large. Borrowing keeps full exposure and adds debt against it. Selling reduces a concentration; borrowing increases it.
- The interest outweighs your conviction. If you would not bet on a rise larger than the interest and fees over the term, the arithmetic favors selling.
- You do not accept the custody terms. If the loan terms available to you allow rehypothecation or pooled custody that you are not prepared to accept, selling ends the question.
- Tax is the main reason to borrow. Tax alone is a weak reason: a liquidation can bring the disposal forward at a worse price. The crypto loan tax guide sets out what the IRS, HMRC and others have and have not said.
Executors and trustees face a further question: whether the governing document and their duties to beneficiaries allow the estate or trust to borrow at all, and whether a lender will accept it as a borrower. That is a question for the estate’s lawyer.
When borrowing can fit
- The need is temporary and there is a repayment source other than the bitcoin: a bonus, a property sale, a business receivable.
- The LTV is low. At 25% LTV, bitcoin has to fall about 69% before an 80% threshold is reached.
- Spare collateral or cash is available to meet a margin call inside the cure window.
- You have read the custody clause and accept who holds the bitcoin and what they may do with it.
Companies document the same trade-off in public filings. MARA Holdings’ quarterly report for the period to 30 June 2026 states that 18,750 bitcoin were pledged as initial collateral for two term loans entered on 4 August 2026, and that if the collateral’s value falls below the margin call limit the company must post more; failure to do so is an event of default that lets the lender liquidate pledged bitcoin. Institutional borrowing is covered in bitcoin treasury financing.
Middle routes
The choice is rarely all or nothing. Selling 5 of the 20 bitcoin and borrowing US$500,000 against the other 15 raises the same US$1,000,000 at an LTV of about 33%. The 80% threshold is then reached only at about US$41,667, a fall of about 58%, and the sale is half the size.
For the sale itself, size changes how it is done. An OTC desk quotes a price for the whole amount or works the order over time: Coinbase Prime’s documentation describes TWAP orders as “designed to execute large orders over time to minimize market impact.” How a desk quotes and settles one is covered in bitcoin OTC and, for sellers, in sell bitcoin OTC; the loan side is in bitcoin-backed loans. Raising cash to buy property has its own route, covered in bitcoin mortgages.
General information, not advice. This page compares two routes in general terms. It is not an offer to lend, to arrange a loan on particular terms, or to buy or sell any asset, and it is not investment, legal or tax advice. The worked example uses assumed prices and thresholds; loan terms are set only by the lender. Take advice from a qualified tax adviser before you borrow against, or sell, a crypto asset. How we are paid.
Primary sources
- Lender terms, accessed 19 September 2026: Ledn; Xapo Bank; Arch; Figure; Unchained; SALT; Milo
- In re Celsius Network LLC, No. 22-10964 (MG), opinion of 9 November 2023 (Bankr. S.D.N.Y.)
- MARA Holdings, Form 10-Q for the quarter to 30 June 2026 (SEC EDGAR)
- Coinbase Prime developer documentation: order types
- IRS: Frequently asked questions on virtual currency transactions; HMRC Cryptoassets Manual: CRYPTO61640
Borrowing or selling bitcoin: frequently asked questions
Is it better to borrow against bitcoin or to sell it?
Neither is better in general. Borrowing keeps your bitcoin exposure and adds a debt, interest and the risk of forced liquidation. Selling raises cash now and ends the price and counterparty exposure, but any gain is generally taxed in the year of sale. Borrowing tends to fit a temporary need with a clear repayment source and a low loan-to-value ratio. Selling tends to fit a permanent need or a position that is already too large.
Can a loan end in a sale anyway?
Yes. Borrowing postpones a sale; it does not rule one out. If the price falls far enough the lender sells the collateral on its own timing, and if the principal cannot be repaid at maturity the bitcoin usually pays it. The difference from selling is that you choose the timing in one case and the lender chooses it in the other.
Which route is taxed sooner, borrowing or selling?
Selling, in most cases. A sale is generally a disposal in the year it happens, while in many jurisdictions taking a loan against an asset is not itself a disposal. But borrowing only postpones the question: a liquidation is a sale you did not time, and it can fall in a worse year and at a worse price. Tax alone is a weak reason to borrow, and a tax adviser should review the loan terms.
Where to go next
For holders of US$100,000 or more in bitcoin choosing between a loan and a sale, the loan side is set out under bitcoin-backed loans and the sale side under selling bitcoin OTC.