Education March 25, 2026 3 min read

How to Borrow Against Bitcoin: A Plain English Guide

By Ducat Team

You've held Bitcoin for years. You need cash now, but selling feels wrong.

Borrowing against Bitcoin is the answer most long-term holders land on. You keep your BTC, access the liquidity, and repay on your terms.

Here's exactly how it works.

Why borrow against Bitcoin instead of selling?

Three reasons.

Tax. Selling BTC triggers capital gains tax. Borrowing doesn't. For holders sitting on large gains, that difference can be substantial.

Conviction. If you believe Bitcoin is going up long term, selling now to buy back later is a losing trade on net. Borrowing keeps you in the position.

Speed. Bitcoin loans can be arranged in minutes. Selling, converting to fiat, and moving money through a bank takes days.

How borrowing against Bitcoin works

The mechanics are simple.

You deposit BTC as collateral. The platform lends you cash or a stablecoin against it. You repay with interest and get your BTC back.

The ratio of what you can borrow versus what you deposit is called the loan-to-value ratio (LTV). Most platforms sit at 40–70% LTV. So £10,000 of BTC gets you £4,000–£7,000.

The catch: if Bitcoin's price drops enough that your LTV exceeds the platform's limit, they'll sell your collateral to cover the loan. This is liquidation, and it's the main thing to manage.

Step by step: how to borrow against your Bitcoin

Step 1: Choose a platform

Options split into two camps: centralised (CeFi) and decentralised (DeFi).

CeFi platforms like Ledn and Nexo are simpler. You create an account, deposit BTC, and borrow. They hold your collateral.

DeFi protocols like Aave and Ducat run on smart contracts. No company holds your BTC. The protocol does.

Step 2: Deposit your BTC

Transfer Bitcoin to the platform's address or vault. On Ducat, this opens a vault on Bitcoin L1. Your BTC stays within the Bitcoin network.

Step 3: Choose your LTV

Borrow conservatively. A 30–40% LTV gives you plenty of buffer if prices drop. The closer you are to the platform's maximum LTV, the closer you are to liquidation.

Step 4: Receive your funds

Most platforms pay out in USDC, USDT, or USD. Ducat lets you choose — borrow UNIT (a Bitcoin-native stablecoin) or receive USDC directly to your wallet.

Step 5: Manage your position

Watch your LTV as Bitcoin's price moves. If it rises, your position gets safer. If it falls, you may need to add collateral or repay some of the loan.

Step 6: Repay and get your BTC back

Repay the loan plus interest. Your collateral is released.

Risks to know before you start

Liquidation risk. A sharp BTC price drop can trigger forced liquidation. Know your liquidation price and keep a buffer.

Platform risk. CeFi platforms hold your BTC. If they fail (see Celsius, 2022), you may not get it back. Non-custodial options remove this risk.

Interest costs. Rates range from 0.5% (Aave) to 27% (YouHodler). Shop around. A loan that costs 20% APR on a flat BTC price is an expensive way to access liquidity.

Wrapped BTC risk. Most Ethereum-based DeFi requires wrapping your BTC (wBTC, cbBTC). If the bridge is compromised, wrapped BTC can lose its peg. Ducat avoids this — everything stays on Bitcoin L1.

The Bitcoin-native option

Most borrowing against Bitcoin still happens on Ethereum. Your BTC gets bridged, wrapped, and used as collateral on an EVM chain.

Ducat takes a different approach. Vaults run directly on Bitcoin L1. You deposit real BTC and choose your output — UNIT or USDC. The process is straightforward regardless of which you pick.

No bridge risk on your collateral. No wrapped token. Your BTC stays where it belongs.

Start borrowing on Ducat →

Quick checklist before you borrow: