Bitcoin News Today: Coinbase's Onchain Loans: Tapping Bitcoin's Value Like Home Equity

Coinbase has surpassed $1 billion in Bitcoin-backed onchain loan originations through its decentralized finance (DeFi) initiative, marking a significant milestone in crypto-backed lending. The service, powered by the Morpho protocol on Ethereum's Layer 2 network Base, allows users to borrow USDC against Bitcoin holdings without selling their assets. CEO Brian Armstrong highlighted the achievement, setting a new target of $100 billion in onchain borrow originations, describing the growth as "hockey stick" and signaling a thriving onchain economy. The platform's loan program, launched in January 2025, has grown rapidly, with the borrowing cap set to increase from $1 million to $5 million to meet rising demand.

The onchain loan mechanism requires over-collateralization, with a minimum 133% loan-to-value (LTV) ratio. If the collateral value drops to 86% of the loan amount, liquidation triggers to repay the debt, including a 4.38% penalty. Borrowers can maintain flexible repayment terms, with interest rates adjusting dynamically on the Base network. The service currently supports Bitcoin as collateral, but Coinbase has indicated plans to expand to other cryptocurrencies.

Market projections suggest the asset-backed lending sector could reach $1.3 trillion by 2030, driven by increasing adoption of crypto as collateral. Coinbase's expansion aligns with broader trends in the onchain economy, where users seek liquidity without sacrificing exposure to Bitcoin's price movements. The platform's focus on accessibility has drawn comparisons to traditional finance models, such as homeowners leveraging property equity.

The milestone underscores Coinbase's strategic shift toward integrating DeFi protocols into its services. While the company previously offered a centralized Bitcoin loan program, the current model leverages Morpho's open-source infrastructure, allowing Coinbase to act as an interface rather than a direct lender. This approach minimizes regulatory risk while accelerating innovation in crypto-backed financial products.

Despite the optimism, risks remain. Sudden Bitcoin price declines could trigger mass liquidations, particularly for users operating near the 86% LTV threshold. Analysts caution that lessons from past DeFi collapses-such as those of Three Arrows Capital and Celsius-highlight the importance of robust risk management in onchain lending. Coinbase has not disclosed specific measures to mitigate such scenarios but emphasizes collaboration with Morpho to ensure liquidity stability.

Armstrong's $100 billion target reflects confidence in the scalability of onchain finance. With the lending market expanding and institutional interest growing, Coinbase aims to position itself as a bridge between traditional and decentralized financial systems. The company's ability to balance innovation with risk mitigation will be critical to sustaining this trajectory.