Coinbase Now Offers ETH-Backed Loans

TLDR

• It’s been almost a year since Coinbase partnered with Morpho to offer BTC-backed loans.
• The program was immensely successful, and now Coinbase is offering ETH-backed loans to the service.
• The official X account also hinted that liquid staked loans are in the works.

Coinbase has expanded its onchain lending product, now allowing eligible customers (sorry, New York residents) to borrow up to $1 million in USDC using their ETH as collateral. Users can get cash without selling their crypto assets.

The service uses DeFi platform Morpho on the Base blockchain, with Coinbase providing the user interface. Coinbase’s expansion into ETH-backed loans follows the success of its BTC-backed product, which launched earlier this year. That service has already seen over $1 billion in loans secured by collateralized Bitcoin from thousands of customers. So, there’s definitely a demand for this kind of liquidity.

If you’re holding onto your ETH for the long haul but need some cash for a down payment, debt refinancing, or another big expense, this could be a game-changer. It allows you to access liquidity without triggering a taxable event by selling your assets. Let’s get after it.

The Skinny on ETH-Backed Loans

So, how does it all work? 

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Let’s break down the details of Coinbase’s new offering.

How Much Can Users Borrow?

Eligible users can borrow up to $1 million in USDC. The loan-to-value (LTV) ratio is a key metric here. You can draw up to 75% LTV, meaning the loan amount can be up to 75% of your collateral’s market value. For example, if you put up $10,000 worth of ETH, you could borrow up to $7,500 in USDC.

But maxxing out your LTV can get real tricky real fast. If the value of your ETH drops or interest accrues, your LTV will rise. If it hits 86%, your collateral will be liquidated to repay the loan. This is the same trigger point as the BTC-backed product. On the flip side, if your ETH appreciates in value or you repay part of the loan, your LTV will fall, meaning you can borrow more. Or, if you looped, it means you will amplify your gains.

What Kind of ETH Is Supported?

Initially, the loans will use wrapped ETH (WETH) as collateral. However, Coinbase has big plans for the future. The official X account confirmed they are working on rolling out loans against staked ETH assets. 

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*Gasp*

These will be converted to cbETH (Coinbase’s staked ETH token) as the underlying collateral. That feature will be available soon, offering even more flexibility for ETH holders.

What About Repayments and Interest?

One of the most attractive features of these loans is their flexibility. There’s no fixed repayment schedule. As long as you maintain a healthy LTV ratio, you can repay the loan on your own timeline.

Interest rates are variable, meaning they can change over time. The rate is determined by the supply-and-demand dynamics on the Morpho protocol. It’s important to note that under the terms of service, you can’t use the loan proceeds to trade more crypto on Coinbase.

Currently, onchain loans are available to verified users in the United States, except in New York State (sad face). 

The Potential Impact on the Market

Coinbase’s decision to add ETH-backed loans is more than just a new product launch. It reflects the growing maturity of the DeFi space. As more investors look for ways to leverage their crypto holdings without selling them, services like this will become increasingly vital.

The impressive numbers from Coinbase’s BTC-backed loan product show strong demand for onchain lending. By expanding to include ETH — and with plans for more assets soon — Coinbase is positioning itself as the key player in the onchain credit market.

The new service also highlights the growing integration between centralized finance (CeFi) platforms like Coinbase and decentralized protocols like Morpho, which Dypto Crypto thinks the world needs a lot more of. 

Coinbase is making decentralized finance more accessible to a mainstream audience. It’s a smart strategy that bridges the gap between the two worlds, offering users the best of both.

For long-term crypto holders, this is fantastic news. It provides a practical way to unlock the value of your assets for real-world needs, all while you continue to hold onto your investment. It’s a powerful tool for financial flexibility in the evolving digital economy.

Prepare for the Bear

With so many red candles over the last few weeks, we could be headed into a bear market sooner rather than later. One way to prepare is to start lining up some fresh capital to make moves while your favorite tokens are “on sale” (not financial advice).

Coinbase’s expansion offers a secure, user-friendly way for ETH holders to access liquidity, underscoring the massive potential of onchain credit. As DeFi continues to grow and merge with traditional finance, we can expect to see even more innovative products that empower crypto users.

ETH holders officially have a new and powerful tool at their disposal. Keep an eye out for further updates as Coinbase continues to add more assets and expand its services globally. The world of crypto finance is just getting started, and it’s developments like this that are paving the way for a more flexible and accessible financial future.