Coinbase has partnered with decentralized money market protocol Morpho to launch Bitcoin-backed loans on Base, its Ethereum layer-2 blockchain. This collaboration enables users to borrow USDC against their Bitcoin holdings without selling their assets.
Key Features of Bitcoin-Backed Loans
👉 Discover how Bitcoin-backed loans work
- Collateralization: Bitcoin holdings are converted 1:1 into Coinbase Wrapped Bitcoin (cbBTC) and deposited into Morpho’s lending pool.
- Loan Amounts: Borrowers can access up to $100,000 in USDC, with rates dynamically adjusted by Morpho’s algorithm.
- Flexible Repayment: No fixed repayment schedule, but users must maintain a healthy loan-to-value (LTV) ratio to avoid liquidation.
- Tax Efficiency: Borrowing against Bitcoin may defer capital gains taxes compared to selling BTC outright.
Why This Matters for DeFi Adoption
Coinbase’s move signals a growing push to bridge traditional finance tools with decentralized finance (DeFi). By leveraging cbBTC, users gain liquidity while retaining Bitcoin exposure—ideal for long-term holders.
Morpho’s Rapid Growth
Morpho has emerged as a top DeFi protocol, with:
- $3.2B+ Total Value Locked (TVL) in 2024 (444% growth).
- Ranked 12th-largest dApp by TVL (DefiLlama).
Comparing cbBTC and WBTC
| Metric | cbBTC | WBTC |
|--------------|---------------------|--------------------|
| Supply | $2.1B (21,495 BTC) | 132,000+ BTC |
| Growth Trend | Rising adoption | Declined 13.4% |
👉 Explore DeFi lending opportunities
FAQs
1. How does Bitcoin collateralization work?
BTC is wrapped into cbBTC (1:1 pegged) and locked in Morpho’s smart contracts to secure USDC loans.
2. What happens if BTC’s price drops?
Borrowers must monitor their LTV ratio; if collateral value falls too low, positions may be liquidated.
3. Is this service available globally?
Currently offered to Coinbase users on Base, though eligibility may vary by region.
4. How are interest rates determined?
Morpho’s algorithm sets rates based on market demand and supply for USDC loans.
5. Can I repay the loan early?
Yes, loans are flexible with no prepayment penalties.
6. What are the tax implications?
Consult a tax advisor, but borrowing may defer capital gains vs. selling BTC.
This initiative underscores Coinbase’s strategy to expand DeFi accessibility while offering capital-efficient solutions for Bitcoin holders.