Spend Bitcoin Without Selling? Here’s How

Your bitcoin has gone up a lot since you first invested. And now you're asking yourself, is this the moment to finally cash out? Maybe for a dream home, a flashy new car, or something even bigger. But here's the dilemma. Some believe Bitcoin's best days are still ahead. With predictions of a million dollars per coin, selling now could mean watching the opportunity of a lifetime slip away. So I have two words for you. Bitcoin lending. A way to unlock cash without parting with a single satoshi and even earn a passive income along the way. It's not a new concept. During the last bull market, crypto lenders like Blockfi, Celsius, Voyager and Genesis were thriving until they collapsed, taking billions of dollars and trust down with them. Now bitcoin lending is staging a comeback. The big question is, what has changed? And is it actually safer this time? In this video, we speak to leading experts in the field to break down how bitcoin lending works in 2025, the different options available out there, and the red flags you need to spot before risking your crypto. Quick reminder before we get started, this video is purely educational and not financial advice. First of all, how does Bitcoin lending actually work? There are two main ways to participate. First, you can be the lender. That means you deposit your Bitcoin on a platform and the platform lends it out to borrowers. In return, you earn interest, usually paid in bitcoin, stablecoins or sometimes platform tokens. It's similar to earning interest on money in a savings account, but with more risk and higher potential returns. Second, you can be the borrower. In this case, you are using your Bitcoin as collateral to take out a loan, usually in fiat or in stablecoins like USDT or usdc. You still keep your Bitcoin, but it's locked on the platform for the duration of the loan. The amount you can borrow depends on the loan to value ratio or ltv. Because Bitcoin is so volatile, most loans are over collateralized. That means you have to put up more than you borrow. For example, with a 50% LTV, you'd need to deposit $100,000 worth of Bitcoin just to borrow $50,000. If the value of your bitcoin falls too far, you could face a margin call. In that case, you'll either need to add more collateral or risk liquidation, which means your bitcoin could be sold off to repay the loan. While the loan is active, you're required to make interest payments. Just like with a traditional loan. Once you've fully repaid both the principal and the interest, the platform unlocks your Bitcoin and returns it to you. So why do people find Bitcoin lending appealing? Mainly because it gives you access to liquidity without having to sell your Bitcoin.

Clients are using that to diversify different investments. They may be covering many different types of expenses, but the core piece is I have something incredibly valuable, I don't want to sell it and I want to borrow dollars against that asset and putting it up in that shape or form.

Another reason has to do with taxation. Selling Bitcoin is in many jurisdictions a taxable event. Borrowing money against it is a way to t to the value of your asset without being taxed. Then there is leverage. By borrowing Bitcoin or stablecoins, traders can increase the size of the positions without using more of their own capital. Finally, unlike traditional bank loans, crypto loans typically are not based on credit scores. That means virtually everyone who has enough collateral to put up is eligible after going through KYC and AML procedures. This video is brought to you by Portal 2 Bitcoin the Gateway Unlocking Bitcoin's full potential Portal uses atomic swaps to connect Bitcoin with Ethereum, Solana and beyond, fast, secure and without bridges or wrapped tokens. Backed by Coinbase Ventures and other leading investors, Portal is building the infrastructure for a truly open, multi chain economy with Bitcoin at its center. Portal to the direct path to cross chain freedom. Learn more@portal2bitcoin.com now there are two main types of Bitcoin lending, centralized and decentralized in the CEFI space. Platforms like LADN or Nexo and others allow users to deposit their Bitcoin and earn a certain yield or take out loans. These companies handle custody and lending decisions, making it easier to use but requiring trust in the platform. On the DEFI side, protocols like AAVE and Compound offer decentralized lending via smart contracts. The main advantage offered by defi lending is transparency. Because all operations happen on chain, they can be easily audited. Another plus is they are permissionless. Users can take out loans instantly without the need for KYC or AML procedures like on CEFI platforms. However, they approaching DEFI platforms is not for everyone. It requires a higher degree of crypto savviness. Now let's talk about the risks. In 2022, the CEFI crypto lending ecosystem imploded as major platforms like Celsius, Blockfi and Voyager collapsed. When Bitcoin prices dropped, they couldn't cover their obligations and locked users out of their own assets. There were several reasons for that. Basically a mix of market volatility, poor risk management, and a lack of appropriate disclosures by some of these companies. Many of these platforms engaged in a practice called rehypothecation, where the collateral is used by the platform to lend it out to third parties or make separate investments and that increase the counterparty risk.

So an example of this is, you know, paying yield on Bitcoin, collecting a whole bunch of bitcoin effectively from retail borrowers, and then maybe using it to buy bitcoin mining equipment. I have to wait, you know, months, maybe years to get that return from the money equipment that I bought. And again, it's not liquid. So if all my clients withdraw their Bitcoin today, I don't have that Bitcoin available to facilitate that withdrawal.

So what's different now? Today, the lending market is about a half of what it used to be at its peak in 2021, mainly because CEFI lending has not fully recovered from the 2022 collapse. DeFi lending now accounts for about 60% of the whole market, which proves its greater resilience to bear market conditions compared to its centralized counterparts.

The institutional CEFI lenders basically were performing margin calls on their borrowers, and basically they weren't getting the capital back and they weren't liquidating the collateral at the points and times where they should have by doing so on chain. On a money market where loans are over collateralized and secured, you have a high degree of determinism and assurance that liquidations will be executed according to the appropriate open source Logic.

Since the 2022 collapse, centralized lenders have become more cautious in how they operate. For example, Laden, one of the top three crypto lenders, now focuses strictly on Bitcoin only loans and and has stopped lending out client assets to generate yields, cutting down on third party credit risk. Similarly, Bitcoin company Strike has launched its own lending service, emphasizing that it does not rehypothecate user funds. At the same time, the market itself has matured and regulation has advanced in some jurisdictions. Even major institutions like JP Morgan are reportedly considering launching their own crypto lending programs as early as next year. But one fundamental fact hasn't changed, and that is the moment you hand over your Bitcoin to a lending platform or protocol, it's no longer truly yours. You have given up control, as the saying goes. Not your keys, not your coins.

Giving away your coins is simply not worth it, even if you desperately need cash. Clients think, well, binance would never steal from me or Coinbase would never steal from me. Sure they would never, probably will never steal from you. But a hack can happen. A government intervention can happen, so people don't know how to calculate the risks for that.

That said, if you decide to use these platforms, it's essential to do careful due diligence. Here are some of the most important factors to rehypothecation this means the platform takes custody of your Bitcoin and uses it for its own purposes, lending it out, trading, or taking on risky investments. If those activities fail, your Bitcoin could be lost. If a platform allows this, it's best to avoid it. Segregated custody. Your Bitcoin should be stored in wallets that are separate from the company's funds and from other customers deposits. This separation helps protect your assets and makes recovery far more likely if the company fails collateral and liquidation rules. Look closely at the loan to value ratio and how liquidations are triggered. Some platforms provide hours or even days to to add collateral if prices fall. Others may liquidate instantly. Understanding this in advance is critical. Proven track record favor platforms that have survived severe downturns such as the 2022 crash, while keeping withdrawal open and protecting client assets. Endurance under stress is one of the best indicators of reliability, Transparency and audits in centralized finance only consider platforms that publish proof of reserves and undergo independent audits. In decentralized finance, make sure the smart contracts are audited and open source so risks can be independently verified. And finally, remember, in crypto there is no government bailout and no guaranteed safety net in case these platforms collapse again.

There's no lender of last resort with an unlimited bankroll like the Federal Reserve. That could result in large realized losses for lenders. If risks get realized, cycles repeat, patterns repeat, and history often rhymes. It would not surprise me whether It's CEFI or DeFi that some actors within that space will again underwriting credit against instruments that are not necessarily worthy of the risk.

That's it for today's video. Let us know in the comments about your experience with Bitcoin lending. I'm Giovanni, your host. See you next time.