- SVB says Bitcoin-backed lending is recovering with stronger risk controls.
- It reported that crypto-backed lending climbed 49% year over year to $67 billion.
- Bitcoin-backed loan rates remain above traditional loans but could decline as competition grows.
Bitcoin-backed lending is moving into a new phase after the failures that shook the crypto credit market in 2022, according to a new report from Silicon Valley Bank (SVB).
The bank said the sector has rebuilt around stricter risk controls, higher transparency, and greater institutional participation, replacing the loose lending practices that led to the collapse of major crypto lenders.
SVB said Bitcoin is increasingly being accepted as collateral because it offers global liquidity, fast settlement, continuous pricing, and can be sold quickly if needed. These features make it easier for lenders to manage risk than many traditional forms of collateral.
The report also noted that several major US banks have started offering Bitcoin-backed credit facilities, showing that products once limited to crypto-native firms are entering traditional finance.
Lending Market Grows as Borrowers Avoid Selling Bitcoin
Crypto-backed lending reached $67 billion, up 49% from a year earlier, according to SVB, citing Galaxy Research. While loans backed specifically by Bitcoin remain a smaller part of the market, growth has accelerated.
Consumer Bitcoin-backed loans are currently estimated at around $3 billion. SVB said that the market could expand toward $1 trillion over the next decade as more long-term Bitcoin holders choose to borrow instead of selling their holdings.
The bank added that this demand is driven by investors who want cash for business expenses, property purchases, or other personal needs while avoiding taxable Bitcoin sales. As Bitcoin ownership expands, lenders are also becoming more comfortable issuing loans backed by overcollateralized BTC positions.
SVB added that today’s lending models look very different from those that failed during the crypto credit crisis. The collapses of Celsius, BlockFi, and Genesis exposed problems such as excessive leverage, poor risk management, maturity mismatches, concentrated counterparty exposure, and the reuse of customer assets.
According to the report, current lenders rely on conservative collateral requirements, continuous monitoring of loan-to-value ratios, and automatic liquidation systems designed to reduce losses during sharp market declines.
Loan Costs Remain High But Could Fall
Bitcoin-backed loans currently carry annual percentage rates between 7.5% and 16%, well above comparable traditional secured loans. SVB believes those borrowing costs could gradually decline as competition increases and more institutional capital enters the market.
The report highlighted Strike’s recently announced 7.5% interest rate for Bitcoin-backed term loans above $5 million. Those loans are supported by a $2.1 billion credit facility from Tether, offering an early sign that pricing may already be moving lower.
SVB also identified the Lightning Network as another factor that could improve the market. The bank said the payment network could allow near-instant collateral transfers, margin calls, and liquidations, making Bitcoin-backed lending faster and more efficient for both borrowers and lenders.
Looking ahead, SVB said the next stage of growth will depend not only on borrower demand but also on attracting more institutional funding. As more banks and private credit providers enter the market, Bitcoin-backed lending could become a more established part of the global credit system.
Related: Cathie Wood: Global Instability Could Fuel Bitcoin Rally
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