Coinbase Is Having a Moment

TLDR

• In the last month, Coinbase’s lending feature has hit $1 billion in loans.
• Now, using the same DeFi project, Coinbase users can lend their USDC for decent yields.
• Both products utilize DeFi, specifically Morpho, but all transactions occur directly within the Coinbase app.

September has been a whirlwind month for Coinbase. The popular centralized exchange has rolled out some game-changing features that could completely transform how you think about earning money with your digital assets.

Aside from the new launch, they also made a massive announcement regarding something we reported on several months ago. Let’s get after it.

The Big News: $1 Billion in Bitcoin-Backed Loans

First up, Coinbase hit a massive milestone with its Bitcoin-backed loan service. In just eight months since launching in January, they’ve processed over $1 billion worth of loans. 

CEO Brian Armstrong was pretty excited about this achievement, posting on X that their next goal is $100 billion in loan originations. Not bad for a financial product that kicked off with a $100k borrowing limit.

Source

But what exactly is a Bitcoin-backed loan? Think of it like using your car as collateral for a traditional loan, except instead of your car, you’re using your Bitcoin. You get cash (in the form of USDC, a stablecoin) without having to sell your Bitcoin and potentially miss out on future gains.

Here’s how it works in simple terms:

• You deposit your Bitcoin with Coinbase
• They convert it to a special version called cbBTC (Coinbase-wrapped Bitcoin), provided you have the $133% collateral required.
• You can borrow up to $1 million in USDC against that Bitcoin
• Your Bitcoin stays yours — you’re just using it as security

You don’t have to sell your Bitcoin to get cash, which means you avoid triggering a taxable event. Plus, there are no minimum payments or deadlines — just keep your loan healthy and you’re golden. This is one of the most powerful crypto use cases, allowing retail users to become their own bank.

A Dash of DeFi Is the Secret Ingredient

What makes this really interesting is how Coinbase is doing it. They’re not handling the loans directly. Instead, they’re utilizing DeFi (decentralized finance) through a protocol called Morpho, which is built on their own Layer 2 blockchain, called Base.

Users get the familiar, easy-to-use Coinbase experience, but behind the scenes, cutting-edge  decentralized blockchain tech is doing the heavy lifting.

The Newest News? USDC Lending

But wait, there’s more! Coinbase has also launched a new feature that allows you to lend out your USDC and earn competitive yields — the platform launched with a yield of 10.8%.

This is pretty exciting for crypto newcomers because:

• You can earn way more than traditional savings accounts or even staking.
• It’s all done through the familiar Coinbase app
• Your funds are accessible whenever you need them (when liquidity permits)
• You don’t need to understand complex DeFi protocols

Here’s the simple version: You deposit USDC, Coinbase creates a smart contract wallet for you, and your funds get allocated across different lending markets to optimize your returns. You start earning immediately, and the whole process is managed for you.

Why It All Matters for New Crypto Users

If you’re just getting started in crypto, these developments are significant for several reasons:

Easier Entry Point: You don’t need to become a DeFi expert to access these advanced financial tools. Coinbase handles the complexity while you get the benefits.

More Ways to Make Money: Beyond hodling, you now have additional ways to earn returns on your holdings.

Bridge to Traditional Finance: These features help crypto feel more like traditional banking — you can borrow money, lend money, and earn interest, just like with regular banks, but often with better rates.

Lower Risk Options: USDC lending provides a way to earn yields without the volatility of other cryptocurrencies since USDC is pegged to the US dollar.

The Bigger Picture: Mainstream Adoption

Coinbase’s busy month reflects a broader trend in crypto — the space is becoming more accessible to everyday users. These aren’t features for crypto wizards. They’re designed for regular people who want to make their money work harder.

The fact that Coinbase processed $1 billion in Bitcoin-backed loans in under a year demonstrates a real demand for these services. People want to unlock the value of their crypto without selling it, and they want to earn competitive returns on their stable assets.

What to Consider Before Jumping In

While these new features are exciting, remember that crypto lending and borrowing come with risks:

• Liquidation Risk: If your Bitcoin’s value drops too much, your loan could be liquidated
• Smart Contract Risk: DeFi protocols, while generally secure, can have technical issues
• Regulatory Changes: Crypto regulations are still evolving

Always start small and never invest more than you can afford to lose.

Coinbase’s September developments show that crypto is rapidly evolving beyond simple buying and selling. Whether you’re interested in borrowing against your Bitcoin or earning yields on your USDC, these tools are making advanced crypto strategies accessible to beginners.

Take some time to familiarize yourself with these concepts, understand the risks, and consider how these tools might fit into your broader financial strategy. The crypto space moves fast, but with platforms like Coinbase making things more user-friendly, you don’t need to be left behind.