Is Borrowing Against Bitcoin Worth It? A Data-Driven Analysis

“Don’t sell your Bitcoin. Borrow against it.” This is a popular Subreddit that, although only a year old, has continued to gain momentum and attract responses. One of the most popular ones is that the EBT interest is lower than the capital gains tax.

While the traction the Subreddit was getting made sense a year ago when the market was still profitable, this year, the story is different. 

Bitcoin has lost its golden mark of $100K, pushing the entire crypto ecosystem to struggle. Despite this downtrend, crypto lending hasn’t slowed down. CoinDesk reported that crypto-collateralized lending has reached $73.6 billion to date. It also reported that on-chain lending and borrowing now represent 66.9% of crypto-collateralized debt.

The increase in crypto-backed lending and borrowing in today’s struggling cryptocurrency market is an interesting trend. Why do investors think it is still worth it?

Reasons Why Crypto-Backed Loans Are Still Worth It?

When an asset’s market is down, it does not make conventional sense to use it as collateral to obtain loans. Investors instead focus on stable assets, like gold. However, cryptocurrencies are in a unique position, and their price action creates the conditions that drive crypto-backed lending to rise.

Long-Term Holders

When the market shows a downtrend, long-term holders refuse to liquidate their positions at a discount for multiple reasons. Also, selling crypto is a taxable event, which can exacerbate their losses.

With borrowing, however, long-term exposure is preserved. And since there is always hope for Bitcoin to recover from its loss, holders stay well-positioned to capitalize on the gains. 

Lower Crypto Prices, Higher Collateral Demand

There is always an increase in collateral demand when the Bitcoin price drops. It is evident from the fact that the value of crypto-collateralized lending has jumped by 27.44% in 2025, which has been a very eventful year for crypto.

Investors simply consider Bitcoin to be a productive asset when the market is down because the market cycle always leads to Bitcoin recovery. And when users are lending against BTC, they can unlock capital at the bottom. The capital that is then borrowed is often deployed into yield strategies, creating a source of passive income.

Traders Leaning on Leverage More When the Market is Down

Not everyone who is waiting for green candles is interested in lending. There is no lack of short-termers in the market. So, when the market becomes more volatile due to downtrends, shorters are attracted to such scenarios like moths to a flame. Investors can also hedge spot positions and accumulate more BTC during dips.

DeFi Lending Has Become Cheaper

Another major reason Bitcoin-backed loans are still considered worthwhile is their affordability. Platforms like Arch Lending, Aave, Maker, and Compound are leading DeFi-lending platforms offering low costs. They also offer higher loan-to-value (LTV) options, feature transparent liquidation protocols, offer stronger insurance reserves, and provide faster on-chain analytics for users to assess the market conditions.

Overall, there are legitimate reasons why crypto-backed loans continue to have value, but choosing the right platform matters. That’s why Arch Lending has become one of the leading options for investors looking to unlock liquidity with Bitcoin.

Arch Lending’s Bitcoin-Backed Loans

Arch Lending has been described on the official website as the world’s leading platform for Bitcoin-backed loans. The platform promises to turn users’ Bitcoin into long-term liquidity. The services it offers are described as white-glove, with special emphasis on bank-grade security and low rates.

Asset Protection

The platform offers asset protection services and enforces policies to ensure that investors’ assets remain safe. For instance, it has a strict no-rehypothecation policy, which means the Bitcoin stored as collateral cannot be used by Arch Lending as collateral for other purposes. It also insures the locked assets, and custody is given to Anchorage, which is a leading custodian and federally chartered bank that stores the assets in cold storage.

Line of Credit Flexibility

Users will find that the credit line provided is flexible. They can increase their loan amounts if their collateralized asset increases in value and can unlock more liquidity by adding more collateral. Loan terms can be extended at any time.

Transparent Terms

The platform’s APR starts at 9.5%, and users can borrow against leading assets such as Bitcoin, Ethereum, and Solana. Users get a default term of 24 months on BTC, which can be extended at any time with a single click.

Final Words

The year is 2025, and the crypto market is in turmoil. But the ongoing volatility has turned the market into the perfect environment to borrow against your Bitcoin. Those who want to short BTC can benefit from it, and so can those who are hoping for the apex crypto to recover. Also, the shifting regulations around crypto, driven by countries becoming more receptive to blockchain offerings, mean that borrowing against Bitcoin could be one of the wisest moves to stay ahead.