Key Takeaways
Coinbase’s Bitcoin-backed loans, powered by Morpho, provide USDC instantly, leveraging cbBTC for seamless on-chain functionality.
This new offering follows Coinbase’s exit from its Borrow program in November 2023, signaling a renewed focus on Bitcoin lending.
Coinbase has partnered with Morpho, a decentralized finance protocol managing $3.7 billion in total value locked, to introduce Bitcoin-backed loans. Through this service, users can borrow up to $100,000 in USDC without selling their Bitcoin, offering a practical and efficient solution for crypto holders.
To streamline the process, Coinbase converts users’ Bitcoin holdings into Coinbase-wrapped Bitcoin (cbBTC) at a 1:1 ratio without charging fees. After the conversion, Coinbase transfers the cbBTC to Morpho, which quickly sends USDC loans directly to users’ Coinbase accounts. This entire process typically takes less than a minute, ensuring speed and convenience.
Collateral Requirements and Liquidation Risks
Borrowers must maintain a collateral ratio of at least 133%. However, they have the option to adjust their loan-to-value (LTV) ratio above this threshold if desired. If the loan balance exceeds 86% of the collateral’s market value, Coinbase enforces liquidation, deducts penalty fees, and returns any remaining Bitcoin to the borrower.
Interest rates, which Morpho sets, adjust dynamically based on market conditions. These rates update every few seconds as new blocks are created on the Base blockchain. Importantly, borrowers do not need to make minimum payments or adhere to fixed due dates, provided they maintain the required LTV ratios.
Flexible Loan Features
By launching this service, Coinbase demonstrates a renewed commitment to Bitcoin lending. This initiative follows the discontinuation of its Borrow program in November 2023 and reflects Coinbase’s effort to enhance user experience and remain competitive in the evolving crypto lending market.
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