Should You Take Out A Crypto Loan?

October 28, 2022

Bitcoin, and crypto markets in general, have been acting all grown up over the last few months. As the stock, bond and currency markets have been on a sickening roller-coaster ride of volatility, crypto, known in the past for its rapid moves, has been a relative area of shelter from the storm. BTC/USD has moved, of course, but the support around $18k that was established back in June has held up and the periodic rallies have been relatively short and not too dramatic. There have been ups and downs in Bitcoin, but not the wild volatility that has been seen in the past.


ETH/USD has seen more movement, but is around 30% above the June lows, so has performed extremely well given what has happened in the world of conventional finance and investment. After the anticipation and the actuality of the merge caused ETH to jump around earlier in the year, it has settled into a tight range over the last month or so.

There is good and bad in that for long-term holders of crypto. The good is obvious…crypto is holding up in a time of volatility and there are at least signs that we are returning to a saner world where things like BTC and ETH don’t necessarily march in lockstep with the Nasdaq or Treasury yields. The bad, though, is that for those who hodl, the last few months have been unexciting with relatively low returns.

One way to counter that is to borrow against your existing crypto holdings. If Bitcoin is holding at around $18k and ETH is doing the same at around $1k, occasional dips are opportunities to buy close to those support levels and borrowing against your crypto is a way of freeing up cash to do that. Or you may want to take advantage of the huge number of opportunities available to investors as even those outside the crypto community begin to see the potential and utility of blockchain technology. Or you may just need to buy a new refrigerator or washing machine, but don’t want to sell any of your crypto to do so. Whatever you need cash for, borrowing against crypto is a logical way of generating some available money when the markets are relatively stable.

That is why SmartFi provides loans to crypto depositors.

Crypto Lending

However, crypto lending, and therefore borrowing, has been under fire this year. Some lazy, uninformed members of the media have portrayed the now bankrupt Celsius as indicative of crypto lending in general and, in doing so, have suggested that anyone engaged in the same business is headed towards the same fate. That is nonsense. Celsius’s problem wasn’t that they were a crypto lender any more than Salomon Brothers’ problem was that they were a bank. The problem was not what they did, but how they did it. Salomon Brothers placed risky bets on mortgage derivatives and credit default swaps with their clients’ money, bets that blew up in 2008. Celsius utilized huge leverage and essentially unhedged trading to generate short-term cash flow, enabling them to offer unrealistic interest on crypto deposits, and to lend against crypto at bargain rates. Neither of those models were sustainable and ultimately, both Salomon and Celsius paid the inevitable price for their recklessness. That doesn’t, however, mean that crypto lending and borrowing are inherently risky or bad. When done sensibly, with reasonable collateral being staked by the borrower and incoming funds used for reasonable purposes by the lender, it can be a useful and rewarding business transaction for both parties.

SmartFi is committed to that principle, offering reasonable interest on crypto deposits, and loans that require some collateral. That way both the borrower and lender can be confident that they are in a mutually beneficial business relationship, not an exercise in gambling.

For crypto investors, the key is to look at what lenders are offering. If they are giving interest on deposits that looks unbelievably good, understand that they are able to do that because they are taking leveraged bets with your crypto when you deposit there. Similarly, if they offer loans with little or no collateral requirement, they are trying to attract deposits with a view to taking those kinds of risks. We cannot logically conclude from the Celsius saga that all crypto lending is flawed, but we can conclude that the way they did it is. The lesson for potential crypto depositors and borrowers is clear…avoid companies and platforms operating with a similar model.

Should You Take Out A Crypto Loan?

So, the answer to the original question “Should you take out a crypto loan” is yes, but with an important proviso. If you want to borrow and have a legitimate need or use for cash, there is nothing inherently risky about staking a portion of your crypto to free up money in fiat or stablecoin. When you do, though, be prepared to offer collateral and be wary of any platform that offers fantastic rates of return. As my father always told me, and I’m sure yours did too, if something looks too good to be true, it probably is!

Loan Calculator

Check out the Loan Calculator to find out how much you can borrow against your crypto balance.

Watch this video to learn more about crypto loans

Author: Martin Tillier
Martin has around forty years of market experience and, in addition to his role as Head of Research at SmartFi, is a daily contributor of market analysis and opinion to He first became interested in crypto 2014, when he started writing regularly on the subject. He is from England but now lives in Connecticut, USA with his wife, his dogs, and his three kids’ college tuition bills. 

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If you want to get involved in the crypto community that funds small business loans, the best way to start is to buy the token.


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