Bitcoin-backed lending is increasingly being used as a source of everyday credit, with borrowers turning to their BTC holdings for liquidity without having to sell.

The market is also moving beyond its early focus on trading. Two established lenders told CoinDesk that bitcoin-backed loans are now being used for expenses such as college tuition, emergency costs, temporary cash-flow shortages and business working capital.

Hunter Albright, chief revenue officer at SALT Lending, said the company is seeing increased demand from customers borrowing against bitcoin for practical financial needs.

“What I am seeing, both in the conversations I’m having and in the data, is that more people are starting to borrow against their Bitcoin for real-world needs,” Albright said. Those needs include emergencies and major personal expenses, such as college tuition and a once-in-a-lifetime trip. Some customers also use the loans to supplement their cash flow.

The trend points to a changing role for bitcoin in financial markets. Instead of using BTC only as a speculative asset, holders can pledge it as collateral and obtain credit while maintaining exposure to the cryptocurrency.

SALT began providing bitcoin-backed loans in 2016, initially serving bitcoin miners that earned BTC for validating transactions. The lender has since attracted more institutional borrowers, as well as Gen X and baby boomer bitcoin owners seeking assistance with the lending process.

SALT has not disclosed its cumulative loan volume. Elsewhere in the centralized lending market, however, volumes have reached billions of dollars.

Ledn, which launched in 2018, has funded more than $11 billion in loans to date. The company expects that figure to reach $1 trillion in the coming years as more customers seek loans for purposes unrelated to trading.

Ledn co-founder and CEO Adam Reeds said the company’s borrowers include traditional investors, entrepreneurs looking for working capital and institutional clients.

Private wealth customers typically borrow larger sums for investments, real estate, business activities and their children’s education, Reeds told CoinDesk. Retail customers generally borrow smaller amounts for short-term needs, such as covering monthly expenses when their primary income falls short.

Accessing Liquidity Without Selling BTC

The key reason for borrowing against bitcoin is to obtain cash while continuing to hold the underlying asset.

Albright said SALT has maintained that philosophy since it began offering bitcoin-backed loans.

“We don’t believe people should have to sell their most valuable assets to get the value out of it,” he said.

Ledn’s customers are similarly motivated. Reeds said borrowers believe bitcoin will appreciate over time while also wanting to retain ownership of their holdings.

That approach helps explain why many customers renew their loans.

“Most clients renew their loans, because the whole premise of this type of lending is not selling bitcoin and continuing to hold the position,” Reeds said.

Albright said the strategy reflects financial practices that have traditionally been available to wealthy individuals and large companies but are now becoming accessible to a wider range of asset holders.

“Now, that is becoming available to a broader group of people based on the asset they own and hold,” he said.

Fixed Rates Could Bring Crypto Lending Closer to Traditional Credit

Lenders are also looking to make bitcoin-backed loans more predictable as the industry expands.

SALT’s longer-term goal is to create products that resemble traditional mortgages, with fixed interest rates and longer repayment periods.

“Our ultimate goal is to have loan products behave much more like a mortgage, where someone can take out a loan, at a fixed rate over a longer term and have greater predictability around the cost of borrowing, even while Bitcoin remains volatile,” Albright said.

Coinbase has already introduced a fixed-rate option. On Sept. 22, the exchange added fixed-rate bitcoin-backed loans to its retail app through Morpho’s Midnight protocol.

Customers can borrow USDC against bitcoin, with the interest rate and repayment date established at the beginning of the loan. The products are offered alongside Morpho’s variable-rate loans, which have more than $1.4 billion outstanding against about $3 billion in collateral.

Coinbase’s fixed-rate products currently have short maturities, while SALT is pursuing longer-term loans.

Lenders See Potential Beyond Bitcoin

Ledn believes the collateral-based lending model could eventually expand into traditional hard assets such as gold.

“The next stage is lending against hard assets more broadly,” Reeds said, pointing to precious metals as a logical next market.

Gold could be particularly significant. Reeds described it as a $20 trillion asset but noted that borrowing against gold has historically been largely limited to institutional investors. For most retail holders, selling gold has been the main way to access its value.

The evolution of asset-backed lending could therefore bring digital and physical assets closer together.

“Our clients increasingly think in terms of hard assets they want to hold for the long term, and borrow against rather than sell,” Reeds said.