Plain English
A crypto-collateralized loan is a loan in dollars or stablecoins where the collateral is your crypto. You deposit Bitcoin or Ethereum, the lender extends a credit line up to a certain percentage of its value (the loan-to-value ratio), and you keep the underlying asset.
How it actually works
On-chain venues like Aave, Morpho, and Compound let you do this entirely through a smart contract. You supply collateral, draw stablecoins against it, and pay floating interest. If your collateral value drops past a threshold, the protocol automatically liquidates part of it to protect the loan.
Centralized venues like Ledn or Nexo offer similar products with fixed terms and higher loan-to-value ratios. The trade-off is counterparty risk versus convenience.
What it means for you
This is the core HNW strategy in crypto. Borrowing against an appreciating asset rather than selling it preserves your position, avoids triggering capital gains, and gives you working capital for opportunities, lifestyle, or strategic investments.
The Crypto-Collateralized Loans pillar in our curriculum is the most-used module by HNW members. We walk through venue selection, LTV management, liquidation defense, refinancing strategy, and the tax and estate implications.
Educational content only. Not investment, tax, or legal advice.