pledgeHow to access cash from your Bitcoin — without selling a single sat
A BTC-backed loan usually is not an immediate taxable disposal when you only pledge BTC as collateral and keep the loan properly structured, while usually deferring immediate capital gains realization if the loan stays properly structured. But this is not just a tax trick. Use this page to understand when borrowing actually beats selling, where liquidation risk changes the math, and how lender structure changes the real tradeoff.
Data checked: June 21, 2026 · 15 tracked platforms
The problem with selling: three costs nobody mentions
Cost #1: Immediate capital gains tax
Sell $50,000 of BTC with a $30,000 cost basis. Your $20,000 gain triggers federal tax at 15–37% plus state tax (0–13%). In California: $4,900 federal + $1,870 state = $6,770 in taxes. You started with $50K in BTC. After taxes, you keep $43,230.
Cost #2: Lost upside
If BTC goes from $70K to $140K in the next 12 months (it has done this multiple times), your sold BTC would have been worth $100,000. You gave up $50,000 in upside to access $43,230 in cash. That is a $6,770 loss on taxes and a $50,000 loss on opportunity cost.
Cost #3: No recovery path
Once you sell, you have to re-buy to get exposure again — at the new, higher price. If you sold at $70K and want back in at $140K, you can now buy half as much. A BTC-backed loan keeps your full position intact.
The math: selling vs borrowing $50,000
| Factor | Sell $50K BTC | Borrow $50K |
|---|---|---|
| Tax hit | $6,770 (15% federal + CA) | $0 upfront (if properly structured) |
| Cash received | $43,230 (after taxes) | $50,000 (full amount) |
| Annual cost | $0 | $5,245 at 10.49% APR (Arch sub-$250K) |
| BTC position | Gone — sold | Kept — locked as collateral |
| If BTC 2x in 12mo | Lost $50K upside | Still own full position |
| Net after 12mo (BTC 2x) | $43,230 | $94,755 ($100K BTC − $5,245 interest) |
| If BTC drops 30% | No downside (already sold) | Margin call risk — a 50% LTV loan rises to ~71% LTV, past the 70% threshold |
Tax estimates use 15% federal long-term cap gains + 9.3% California state. Your rates may differ. Borrowing example uses Arch at 10.49% all-in APR (sub-$250K tier) interest-only on 12-month term.
How a BTC-backed loan works in practice
Lock BTC as collateral
Transfer your Bitcoin to the lending platform or lock it in a smart contract. You still own it — it is collateral, not a sale.
Receive cash (USD)
The platform sends you cash based on your collateral value and their LTV ratio. These are illustrative LTV examples (the worked $50K comparison above assumes a conservative 50% LTV): at 50% LTV, $70K in BTC = a $35K loan; at 60% LTV (Arch), the same $70K supports a $42K loan.
Pay interest monthly
Most platforms charge interest-only payments monthly. At Arch's 9% interest on a $35K loan, that is $262.50/month (a 0.49–1.49% origination fee is already folded into its 10.49% sub-$250K APR). Ledn has no origination fee, and Figure adds 1%, so upfront fees still matter.
Repay and get your BTC back
At the end of the term, repay the principal and your BTC is returned. No capital gains were triggered. You kept all the upside.
Starting points once you decide borrowing beats selling
These are research starting points, not universal winners. Match the lender structure to the real job you need the loan to do.
| Priority | Starting Point | Why |
|---|---|---|
| Maximum safety | Unchained (9.0/10) | Multi-sig, you hold a key, NMLS licensed, 24h grace period |
| Flexible line of credit | Arch (published from 7.25%) | 60% LTV, bankruptcy-remote structure, Anchorage custody; 0.49–1.49% origination fee is already included in APR (10.49% all-in for a typical sub-$250K loan) |
| Large loans ($250K+) | Ledn (7.4/10) | Tiered rates down to 9.25% for $2M+, $10B funded, BitGo custody |
| Small loans ($500) | Ledn or Figure | Low minimums, but Figure charges origination fee |
| Privacy (no KYC) | Lava (3.4/10) | Most direct BTC-first no-KYC route, but its custody model is unresolved (reportedly custodial as of Nov 2025) — fits smaller active borrowers best |
Three risks to watch out for
Liquidation risk — BTC drops and you get margin called
If BTC drops 30% while you have a 50% LTV loan, your LTV jumps to 71% — above most platforms' margin call threshold (70%). You must add more collateral or repay part of the loan, or the platform liquidates your BTC. Unchained gives you a 24-hour grace period. Lava's thresholds and timing are shown in-app rather than published, so verify them before borrowing. See our BTC drops analysis for exact numbers.
Rehypothecation — some platforms lend out your BTC
Some platforms still require account-level confirmation on collateral-use terms. Nexo and YouHodler remain more form- or account-dependent in our current data, while Figure's current public loan page says collateral will never be rehypothecated. Unchained, Ledn, Arch, Strike, Xapo Bank, and SALT also have source-backed no-rehypothecation language or architecture. Lava previously claimed no rehypothecation, but because its custody model is now unresolved (reporting indicates a move to custodial cold storage as of Nov 2025), that claim can no longer be treated as architecturally enforced.
Origination fees — Figure charges 1% upfront
Figure advertises 8.91% but charges 1% origination, making the effective APR 9.999%. On a $50K loan, that is $500 in fees before you even start paying interest. Arch charges a 0.49–1.49% origination fee (already included in its APR), while Ledn is the cleaner no-fee option in this group.
How to use this before you pick a lender
If you have held Bitcoin for more than one year and face a meaningful capital gain, a BTC-backed loan almost always beats selling. You avoid taxes, keep your upside, and access the cash you need. The borrowing cost is often still less than the tax hit from selling, especially if you keep LTV conservative and compare all-in pricing instead of teaser rates.
The key is choosing a structure with no rehypothecation and strong custody where possible, then matching it to your loan size, timing, and liquidation tolerance. Keep the next step in the research flow, not the shopping flow.
Related research
Borrow or Sell? A Decision Framework
The actual math on both approaches — taxes, opportunity cost, and risk.
Borrow Against Bitcoin: Tax Implications
IRS treatment, three tax traps, and which lender structures create the lowest tax friction.
Bitcoin Loan Calculator
Real math for all 15 lenders — how much can you borrow?
Bitcoin-Backed Loan Risks
The 5 real risks and how each lender handles them.
Keep the next step in the research flow, not the shopping flow
Use the loan hub, tax guide, and borrow-vs-sell framework to pressure-test tax deferral, lender structure, and downside before you move into lender-by-lender selection.