What Can You Use a Bitcoin-backed Loan For?

Bitcoin-backed loans let you unlock the value of your BTC without selling it. But when does that make sense, and how are people actually using them?

For Bitcoin holders, selling can trigger potential tax obligations, reduce future upside exposure, and leave you with fewer digital assets during key price moves. But life’s needs, from opportunities to emergencies, don’t wait.

In this guide, we break down the top reasons to take a Bitcoin-backed loan, backed by real examples from Ledn clients.

What is a Bitcoin-backed loan?

A Bitcoin-backed loan is a secured loan where your BTC acts as collateral. You deposit Bitcoin, and the lender gives you fiat (like USD).

Ledn offers two main products:

• Dollar loans: Borrow cash using your Bitcoin as collateral. Dollar loans are denominated in US dollars, but can be disbursed in USDC or other local currencies. 
• B2X loans: Use your Bitcoin to buy more Bitcoin, effectively doubling your position.

Availability of Bitcoin-backed loans varies by region. Ledn’s loans are not available in certain jurisdictions, including some U.S. states and Canadian provinces. 

Here’s how it works:

1. You deposit your Bitcoin with Ledn as collateral.
2. You receive a loan worth around 50% of your Bitcoin’s value in USD.
3. You repay the loan with interest, and upon repayment in full your Bitcoin is returned to you.
4. If the price of Bitcoin drops, you may receive a margin call. But this doesn’t mean immediate liquidation. You’ll have several options to keep your collateral safe:
   
   1. Add more Bitcoin to boost your collateral
   2. Make a partial repayment to rebalance the loan
5. Repay at any time with no early repayment fees

Ledn gives you alerts, guidance, and flexible tools so you can stay in control and avoid liquidation wherever possible.

Read more: How to Borrow Against Crypto – Decoding Crypto Loans

Why use a Bitcoin loan instead of selling?

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Selling Bitcoin can be costly, not just due to market timing but also because of tax consequences.

With a Bitcoin-backed loan, you hold the Bitcoin collateral instead of selling it. That means:

Potential tax benefits: In some jurisdictions, loans may not trigger capital gains taxes, unlike direct Bitcoin sales. However, this varies by region—please consult a tax advisor.

Retain upside: Stay exposed to Bitcoin’s price growth rather than cashing out too soon.

There are a few benefits over traditional loans:

No credit checks: Your Bitcoin secures the loan, not your income or credit score.

Fast approvals: Get funded in hours, not weeks.

Available to all: Many Ledn clients, especially developers, freelancers, or those in underbanked regions like Latin America, turn to crypto loans because traditional banks shut them out.

Read more: Crypto Loans vs. Traditional Loans

Best use cases for a Bitcoin loan in 2025

Grow your crypto portfolio (B2X or manual buy)

Clients often want to increase their holdings by using their Bitcoin holdings as collateral for a loan to buy more Bitcoin, effectively doubling their Bitcoin position. Note that this leveraged strategy can amplify gains and losses and increase the risk of collateral liquidation.

Example: A client takes a B2X loan when Bitcoin is at $70,000, with the goal of benefiting from a price increase to $95,000. The potential appreciation on their Bitcoin position may cover the loan’s interest cost. However, this leverage strategy also carries significant risks, as price drops could lead to collateral liquidation or losses. 

For clients where B2X isn’t available, they can take a dollar loan, then manually buy more Bitcoin or other digital assets on an exchange.

Read more: The 8 Best Crypto Loan Platforms in the USA in 2025

Generate passive income through Bitcoin-linked stocks or ETFs

Some clients borrow to buy Bitcoin-exposed stocks or funds (like MSTR or STRK) that pay dividends.

For example, a client takes out a $50,000 loan at ~12% APR, buys dividend-paying shares yielding ~10%, and offsets most of the loan cost while gaining indirect Bitcoin exposure.

Purchase residential or commercial real estate

Many Bitcoin holders can’t qualify for traditional mortgages, especially if they’re “Bitcoin retired” without W-2 or T4 income.

Others use Bitcoin loans to cover down payments on properties when the bank only covers part of the purchase.

Fund or expand a business

Entrepreneurs increasingly hold Bitcoin on their balance sheets.

A company might take on a $500,000 loan to finance operations without liquidating its BTC reserves or diluting equity.

Bridge short-term cash flow gaps

Some clients treat Bitcoin loans as a flexible line of credit.

A freelancer earning $5,000 one month but only $1,000 the next uses a Bitcoin loan to cover $2,000 of living expenses, then repays it the following month, with no penalties, and no headaches.

Cover emergencies or medical expenses

Unexpected bills happen.

A client faces a $15,000 medical cost and doesn’t want to sell BTC at a low point, so they borrow short term and repay over the next few months.

Make payroll or cover business expenses

Crypto startups often hold large Bitcoin reserves.

A startup borrows against BTC to pay employee salaries or cover key expenses during a tight funding window.

Diversify into stocks, bonds, or funds

A client uses a Bitcoin loan to buy traditional investments, diversifying their portfolio without selling BTC.

Preserve Bitcoin holdings in unstable banking regions

Clients unable to access traditional banking can use BTC to access liquidity while keeping their BTC as long-term savings.

Take advantage of Bitcoin’s “digital gold” stability

As Bitcoin’s volatility decreases over time, many holders treat it like a home equity line of credit, borrowing confidently against a strong, globally recognized asset.

Execute arbitrage or hedging strategies

Advanced traders borrow against Bitcoin to capture price differences across exchanges or hedge exposure across assets without giving up their BTC.

Follow a MicroStrategy-style corporate balance sheet strategy

Businesses borrow dollars to buy Bitcoin as a treasury asset, leveraging their balance sheet for long-term Bitcoin exposure.

Tap cross-border opportunities

A client uses a Bitcoin loan to fund an international property purchase or expand into offshore markets, bypassing local banking restrictions.

Benefits of Bitcoin-backed loans

✅ Unlock liquidity without selling your Bitcoin

✅ No impact on your credit score

✅ Fast approvals, often within hours

✅ No monthly payment requirements — repay on your terms

✅ Works for underbanked or nontraditional income profiles

✅ Flexible use across personal, business, or investment needs

Despite the advantages, it's crucial to understand that Bitcoin loans involve risks, namely Bitcoin price volatility, margin calls, and the potential for losing your collateral.

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Common fears and misconceptions about Bitcoin Loans

While Bitcoin loans offer flexibility and opportunity, many people hesitate due to fears or misunderstandings. Here’s how we address the most common concerns:

1. “What if I lose my Bitcoin?”

This is the number one fear: that market volatility will trigger liquidation. But Ledn clients have powerful safeguards:

Margin call warnings: Clients are alerted well before they hit critical thresholds.

Auto-top-up features: Automatically protect your collateral without manual intervention.

Proven track record: During a recent 32% BTC price drop (from $109,000 to $74,000), Ledn’s robust systems and proactive client actions helped many clients avoid Bitcoin-backed loan liquidations. However, past performance does not guarantee future outcomes.

2. “I don’t understand how Bitcoin loans work”

Many people think they need:

• A credit check (they don’t).
• Monthly payments (they’re optional).
• To pay penalties for early repayment (there are none).

Ledn prioritizes education, helping clients understand how to manage collateral, monitor LTV, and make loans work for their goals.

3. “Bitcoin loans are too expensive”

While rates vary (typically 11–13%), some clients aim to offset borrowing costs through Bitcoin appreciation or strategic use of loan proceeds. However, this involves market risks and is not guaranteed. 

4. “Lending platforms can fail”

After the 2022 industry shakeout, clients understandably want reassurance. 

Ledn:

• Operates with strict proof of reserves.
• Has never lost client assets.
• Prioritizes safety and transparency, unlike past platforms that took reckless risks.

5. “Bitcoin loans aren’t as safe as banks”

In some regions (especially Latin America), Ledn may even be more reliable than local banks, where government instability or expropriation has historically threatened client funds.

Ledn was built specifically for Bitcoin. It is a globally resilient, crypto-native borrowing solution.

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What to consider before taking out a Bitcoin loan

✅ Volatility risk: Bitcoin can swing 20% or more month-to-month, raising liquidation risks.

✅ Loan-to-value (LTV): Know when margin calls happen.

✅ Platform credibility: Choose secure, regulated providers like Ledn.

✅ Interest rates and fees: Understand the full cost before borrowing.

✅ Risk management: Be cautious with leveraged strategies like B2X. They can amplify gains but also magnify losses.

Who should (and shouldn’t) use a Bitcoin loan?

Bitcoin loans are best suited for:

• Long-term Bitcoin believers who want to hold, not sell
• Entrepreneurs or investors needing fast, flexible capital
• Underbanked individuals or those locked out of traditional credit systems

They are less ideal for:

• Anyone relying solely on current BTC value for financial security
• Borrowers unfamiliar with crypto lending risks
• Users hoping for high-risk, high-reward bets without a solid repayment plan

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Get started with a Bitcoin Loan

Bitcoin-backed loans aren’t just for traders or tech enthusiasts. Whether you’re buying real estate, funding a business, covering emergencies, or simply growing your crypto portfolio, they  can offer fast and flexible access to liquidity, potentially without triggering a realized capital gain in some regions. However, this varies by jurisdiction and carries risks, including collateral liquidation.”

Interested in learning more about Bitcoin-backed loans? Open a Ledn account to explore how these loans work and if they’re suitable for your financial needs.

Ready to unlock the power of your Bitcoin? Open a Ledn account to explore how crypto-backed loans work and if they’re suitable for your financial needs.

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Disclaimer

This article is sponsored by 21 Technologies Inc. and/or its subsidiaries (“Ledn”) and is for general information, discussion, or educational purposes only and is not to be construed or relied upon as constituting legal, financial, investment, accounting, tax, estate-planning, or other professional advice or recommendation. Please read Ledn’s full Risk Disclosure Statement and Disclaimers.

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