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Coinbase Bitcoin Loans Cross $1B but Warning Signs Appear

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Abhijeet SabhadindeBy

Key Points

  • Coinbase crosses $1B in BTC-backed USDC loan originations
  • Loans powered by Morpho protocol on Base blockchain
  • Borrowers risk liquidation if BTC drops beyond 86% LTV
  • DeFi Summer flashbacks raise red flags about risk exposure

Coinbase Bitcoin Loans have now surpassed $1 billion in total originations, marking a bold new chapter in the company’s decentralized finance (DeFi) ambitions.

This figure represents the total value of loans issued using Bitcoin as collateral, and it’s all happening on Coinbase’s own Layer 2 blockchain, Base, through the Morpho protocol.

Dune Analytics shows that Coinbase has already processed $1.003 billion in loans, backed by $1.449 billion worth of Bitcoin as collateral. That’s a huge leap for a service that only launched earlier this year.

Coinbase On-chain Borrow Originations. Source: Dune Analytics - Techtokens

Coinbase On-chain Borrow Originations. Source: Dune Analytics – Techtokens

Coinbase CEO Brian Armstrong took to X (formerly Twitter) to celebrate the growth and teased bigger ambitions ahead:

“Next goal: $100 billion in on-chain borrow originations. The on-chain economy is thriving. Proud of the team for making DeFi more accessible.”

This lending feature allows users to borrow USDC without selling their Bitcoin, giving them liquidity without letting go of their assets. However, the service excludes customers from New York State due to regulatory restrictions.

Max Branzburg, Coinbase’s VP of Product, also commented:

“Crypto-backed loans are helping users access liquidity for everyday needs, without selling their BTC. This is the future of finance.”

With industry support from well-known names like Anthony Pompliano, many see this move as Coinbase cementing its lead in regulated, accessible DeFi.

And as interest in DeFi products rises, investors are also turning their attention to newly listed altcoins that offer early access to emerging tokens before they hit major exchanges.

Risks Resurface as Crypto Lending Grows Fast

While Coinbase Bitcoin Loans are gaining traction, they’re also reviving memories of the 2020–2022 lending boom, and bust. The model is promising, but the risks are real.

Back in the DeFi Summer of 2020, protocols like Aave and Compound exploded in popularity. Billions flowed into crypto lending platforms. But the growth came with poor collateral risk management, which later led to the collapse of major firms like Three Arrows Capital (3AC) and Celsius.

Coinbase is trying to avoid those mistakes by implementing structured risk limits. The platform allows an initial Loan-to-Value (LTV) ratio of up to 70%, with a liquidation threshold set at 86%. That means if Bitcoin’s price crashes and a user’s LTV crosses 86%, their collateral can be liquidated—with a 4.38% penalty.

For example:

If a user borrows $100,000 USDC against $250,000 in BTC (40% LTV), a sudden price drop in BTC could raise their LTV close to 86% and force liquidation.

DeFi analyst Marty Party warned:

“If BTC crashes suddenly, many users will face forced liquidations, even with seemingly safe LTVs. Borrowers need to stay alert.”

To mitigate risk, most users are reportedly keeping LTV ratios between 30–40%. But crypto volatility is unpredictable, and extreme market conditions can quickly change that safety buffer.

Investors keeping an eye on Bitcoin volatility are also closely watching Ethereum price predictions as ETH trends often influence the broader DeFi market—including collateral-backed loans.

Coinbase Pushes for Safer, User-Friendly DeFi Lending

One key difference between Coinbase Bitcoin Loans and past DeFi lending protocols is user experience and trust. Coinbase is positioning its product as the safer, regulated version of crypto lending, one that could appeal to everyday users, not just crypto natives.

The company has taken steps to make the borrowing process transparent and user-friendly. Interest rates are visible up front, LTV limits are clearly defined, and risk parameters are communicated effectively. Plus, loans are overcollateralized, which lowers systemic risk.

This structure gives Coinbase an edge over other platforms. Unlike native DeFi apps, which often require complex wallets and user interfaces, Coinbase integrates the process into its main app, making it far more accessible.

Still, accessibility doesn’t eliminate risk. As with all Coinbase Bitcoin Loans, the value of collateral fluctuates. Bitcoin’s notorious price swings can still catch users off guard, especially during volatile periods like Fed rate hikes or crypto sell-offs.

Another benefit for users is flexibility. Borrowers can repay anytime without penalties, and their Bitcoin remains untouched unless liquidation thresholds are crossed. This setup is appealing to long-term holders who want liquidity but don’t want to sell their BTC.

For context, similar projects like Crypto AI companies are gaining traction by integrating automation into risk management, something centralized players like Coinbase may look into as adoption scales.

Can Coinbase Sustain This Growth Amid Market Shocks?

The $1 billion figure cements Coinbase Bitcoin Loans as a serious player in crypto lending. But maintaining this momentum will require tight risk control, especially in a market known for sudden swings.

Coinbase’s advantage lies in its reputation and regulatory alignment. It’s one of the few U.S.-regulated exchanges offering such a service, and that gives it credibility among mainstream users. But the company is also now playing in a space that has a history of dramatic blowups.

If Bitcoin sees another 30–40% price correction, as it did during multiple past cycles, Coinbase will face its first real test. Will its risk parameters hold? Will its users understand how to avoid liquidation?

The success of Coinbase Bitcoin Loans hinges on two things: how well Coinbase can manage volatile markets and how well its users understand the risks of borrowing against a volatile asset like Bitcoin.

The emergence of risky tokens like Cancer meme coin also underscores how fast-changing and unpredictable the crypto market can be. Any instability in the broader ecosystem could ripple through platforms like Coinbase.

Meanwhile, high-profile holdings such as Justin Sun’s TRON portfolio serve as another reminder of how concentration risks can suddenly affect market liquidity and platform trust.

For now, the milestone is a big win for on-chain finance. But as history has shown, in crypto lending, success is not just about hitting big numbers, it’s about surviving the storm that follows.

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Abhijeet Sabhadinde
Abhijeet is a crypto and Web3 writer focused on clarity and results. He covers DeFi, NFTs, and market shifts with content that grows search and authority.
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