In today’s rapidly evolving landscape, cryptocurrencies have become the new mode of wealth management. High net-worth individuals, especially, are taking advantage of tokens like Bitcoin, which have and continue to gain much popularity. With digital assets becoming very popular all around the globe, crypto loans have surfaced as powerful tools that allow investors to access liquidity without having to sell their assets.
According to the Capgemini Wealth Report, 71% of high-net-worth individuals are already invested in digital assets. This just shows how much these investments are increasingly gaining significance in modern portfolios. With information like bitcoin price history out there, these individuals can easily assess how much potential they are exposed to by investing in a token like Bitcoin. With that, taking loans against the crypto they have allows them to free up capital for other investment opportunities.
Crypto-backed loan lenders coming up strong
Big banks across the US might be raking in billions in interest, but many of them have become wary of the growing crypto threat. Some banks, eg, JPMorgan, have even started getting into the crypto space, having offerings of their own.
One of the most profound crypto lenders is Xapo Bank. With Xapo, individuals or businesses can get access to up to $1 million in cash without having to sell their BTC. The lender offers repayment schedules of 30,90, 180 and 365 days without any penalties for early repayment.
A similar lender, Nexo, allows users to borrow against over 100 cryptocurrencies. In Australia, Block Earner will become the first company in the country to offer crypto-backed home loans. The company said that it can offer loans of up to $5 million with an LTV of 40%.
But the main question people are asking themselves is why many crypto holders prefer to use crypto as collateral rather than the traditional forms of lending. Here are some of them
Access liquidity without asset liquidation
Affluent investors are most compelled to get crypto-backed loans since they are able to unlock liquidity without having to give up ownership of their digital assets. You see, selling off your crypto can trigger capital gains tax and forego potential future profits.
For instance, with Bitcoin, prices have been going up steadily over the last few months. In March 2024, the token reached $73,000 for the first time ever. However, in July 2025, the token surpassed the $120k mark. Investors who follow up on these prices feel the need to hold the tokens for even higher potential future profits.
With investors, it’s all about profits. If they are not subject to capital gains tax and are earning from their current tokens, then they are more than happy to take loans. And as the CEO of Block Earner, Charlie Karaboga, puts it, there is no need for crypto earners to choose between holding digital assets and buying homes. Both can work at the same time.
Speed and convenience
When you go to a traditional bank to get a loan, you will be subjected to long wait times and different rounds of vetting. If you have a company, the bank will ensure to scrutinize everything, from your history with loans to your credit rating, and more. But this process is understandable as banks have to protect themselves from defaulters. However, all this is too tedious.
The minimum amount of time that a bank can take to approve a loan typically varies between 48 working hours and 2 weeks. All this is dependent on the type and amount of loan you want to take. However, crypto lenders approve loans within 24 hours. Also, there is no need for guarantors or doing credit checks. The process is almost instant.
All that a business/individual requires is to have collateral. For a company like Ledn, you can qualify for a personal loan with as little as $1000 worth of Bitcoin as collateral. For YouHodler, there are no origination fees, meaning that for someone who wants quick, short-term liquidity without paying anything, they are sorted.
Risks and considerations
The advantages of crypto loans are as clear as day, but investors should not forget the risks that come with them. Digital assets are the most volatile of assets, with their value increasing and decreasing without warning. If the value of the collateral goes down, the lender will require the investor to add more collateral or force liquidation.
To curb such a risk, many crypto loans over-collateralize to ensure that the value of the digital asset is always above the loan amount. Many lenders cap their LTV at 70% but some are more generous. For example, YouHodler allows investors to borrow loans with LTV ratios of up to 90%. However, it is very important that borrowers monitor the value of their collateral, as market volatility can also trigger margin calls.
When you compare this to conventional loans, you realize that it is the only asset you are at risk of losing when put as collateral. In the traditional assets, a borrower can only lose their collateral if they fail to meet the repayment terms. So, as much as you are bound to gain profit from the digital asset, it is the only asset you can lose, even though you are up to terms with the payments.
It’s true that cryptocurrencies are rapidly changing the financial landscape, with crypto-backed loans filling the air. However, you should make sure to do proper research before going in that direction. In the same manner that there are numerous advantages to these types of loans, in the same measure are there risks that could mess up your accounts.