Why Bitcoin Loan Interest Rates Are Trending Down—What Unchained’s $1B Breakthrough Means for Borrowers

Bitcoin-collateralized loan rates are quietly trending lower in 2025. Competition has intensified, institutional liquidity has deepened, and risk management has matured—creating a borrower’s market across much of the secured (over-collateralized) segment. Unchained’s recent milestone—surpassing $1 billion in bitcoin-backed loan originations—arrived alongside an APR reduction. Together, these shifts signal a new phase for BTC credit markets: safer custody, clearer pricing, and better terms for long-term holders who prefer borrowing to selling.

The Big Context: Bitcoin Credit Is Maturing

After the 2022 CeFi blowups, crypto credit had to rebuild around transparency, segregation of collateral, and on-chain verifiability. By 2024–2025, two reinforcing trends took hold:

1. Institutionalization & Liquidity. Spot bitcoin ETFs and prime services broadened access, thickening order books and liquidity. That typically reduces volatility and funding spikes, letting secured lenders price risk more tightly. Recent data show subdued perp funding and a lower CME futures premium, dulling the “hot money” edge but stabilizing the environment for collateralized lending.

2. Competition & Product Design. More venues (banks, prime brokers, CeFi lenders, on-chain credit pools) are offering BTC-collateralized credit. Competition narrows spreads and pushes APRs lower for safer, over-collateralized loans—especially at low LTVs. Galaxy’s market map shows how both CeFi and DeFi lending have rebounded with better risk controls and clearer custody.

Not all credit is equal. Unsecured or under-collateralized loans—now re-emerging in some markets—still price in steep default risk (often 20–30% APR), and they are not representative of the secured BTC-loan trend.

The News: Unchained’s $1B Milestone—and a Rate Cut

On July 9, 2025, Unchained announced it had surpassed $1 billion in BTC-backed loan originations over nine years and lowered APRs. Even without exact figures in the announcement, the direction is notable: a leading, BTC-only lender is cutting rates while maintaining a client-controlled 2-of-3 multisig custody model and a no-rehypothecation policy. That combination—safer custody + cheaper capital—is a meaningful signal for borrowers.

What’s distinct about Unchained’s structure?

• Custody: Client holds a key; collateral is verifiable on-chain in a 2-of-3 multisig vault.

• No rehypothecation: Collateral is not re-lent into opaque strategies—reducing counterparty chains and “who-has-my-coins?” risk.

• Payment mechanics: Interest-only payments every 30 days; principal due at term; rates/terms vary and can change.

Unchained’s move also lines up with broader competition: for example, Ledn publicly lists BTC loan rates starting near ~11.4% interest (≈13.4% APR) as of 2025—evidence that headline rates in the secured segment are not where they were at the peak of turmoil. Exact quotes depend on LTV, term, and client profile, but transparent, mid-teens APRs (or lower for conservative LTVs) are increasingly findable from established providers.

Why Rates Are Easing (Even as Base Rates Don’t Plummet)

It’s tempting to anchor crypto loan pricing entirely to central bank policy. But in BTC-backed lending, crypto-native factors dominate:

• Tighter spreads from subdued leverage: In July, the CME futures premium fell to multi-month lows and perp funding was muted. That environment curbs speculative froth and compresses the risk premium lenders demand for secured loans, particularly at low LTVs.

• ETF-driven depth: Persistent ETF inflows and corporate treasury demand support deeper spot market liquidity, lessening panic spikes and tail risk premiums in secured credit.

• Better custody standards: Multisig/tri-party setups with verifiable on-chain collateral reduce operational and counterparty risks—again tightening spreads.

Meanwhile, macro remains a mixed backdrop. In the U.S., the Fed kept rates steady into late July (target 4.25%–4.50%; prime ~7.5%), while the Bank of England has cut multiple times (base rate 4.25% in May), showing that fiat funding costs differ by jurisdiction. Crypto lenders triangulate all of this, but the crypto-specific risk cycle has been the bigger swing factor for BTC loan pricing in 2025.

How BTC Loan Rates Are Set (and How You Can Lower Yours)

BTC-backed loan APRs are a function of:

1. Loan-to-Value (LTV). Lower LTV (e.g., 20–35%) usually means meaningfully lower APR; higher LTV (e.g., 50%+) raises both APR and liquidation risk.

2. Collateral handling & rehypothecation. If your lender re-lends collateral, you may see quoted rates fall—but you’re absorbing extra counterparty risk. “No rehypo” models often command a modest premium, but that gap is shrinking as competition intensifies.

3. Custody model & verification. Client-key multisig and on-chain proof reduce opaqueness and can help compress risk premia.

4. Market liquidity & volatility. Lower realized vol and tighter basis/funding typically support cheaper secured credit.

5. Term & structure. Interest-only, bullet repayment vs. amortizing schedules change effective APRs; always compare APR, not just the headline rate.

Borrower playbook to cut your APR:

• Post more collateral (target a conservative LTV).

• Choose longer relationships with lenders that keep collateral segregated and verifiable.

• Ask for no rehypothecation and tri-party/multisig custody.

• Shop multiple quotes and compare APR apples-to-apples (origination fees included).

Market Snapshot (Non-Exhaustive, August 1, 2025)

• Unchained: $1B+ in lifetime originations; APRs recently lowered; client-controlled 2-of-3 multisig; no rehypothecation.

• Ledn: Publicly lists BTC loan interest starting ~11.4% (≈13.4% APR); secure storage via BitGo.

• DeFi options: Dynamic rates via on-chain markets (protocol and liquidity dependent). Conditions can occasionally offer single-digit annualized borrowing for stablecoins against tokenized BTC collateral, but are variable and require self-management.

• Caution: A separate tier of unsecured or lightly-collateralized crypto loans prices at 20–30%+ and carries materially different risk.

Note: Exact quotes change frequently and depend on LTV, term, and your profile. Always verify current pricing.

What Unchained’s $1B Milestone Signals

• Scale & survivorship: Nine-year operating history through multiple cycles matters in credit. Crossing $1B while cutting APRs suggests confidence in risk controls and access to stable capital.

• Custody standard-setting: Client-key multisig with on-chain verification is becoming the default expectation for serious BTC borrowers—pushing the market to compete on rate, transparency, and service, not opaque yield games.

• Borrower bargaining power: As leading BTC-only lenders target long-term holders, low-LTV borrowers can often negotiate tighter spreads—especially if they prioritize non-rehypothecation and clear liquidation rails.

Is Now a Good Time to Borrow Against Bitcoin?

It can be—if your use-case is strong and your risk controls are strict.

Good fits

• Short-term fiat liquidity for taxes, business cash flow, or asset purchases where selling BTC would trigger capital gains or disrupt long-term allocation (consult a tax advisor).

• Long-term holders comfortable with low LTVs and the potential for BTC drawdowns.

Don’t borrow if

• You need high LTVs to make the math work.

• You don’t have a liquid reserve to top up collateral during volatility.

• You aren’t fully clear on custody, rehypothecation, and liquidation mechanics.

Risk & Red Flags Checklist

• Rehypothecation risk: If your lender re-lends collateral, your rate may be lower—but hidden counterparty chains increase tail risk. Ask for proof of non-rehypo.

• Opaque custody: Avoid set-ups where you can’t verify collateral on-chain or don’t hold a key. Favor client-key multisig and clear tri-party agreements.

• Unsecured/under-collateralized loans: Tempting headline rates can mask default risk; recent offerings show 20–30%+ APRs and limited recourse.

• Volatility traps: Low funding/basis today can change quickly—build margin for drawdowns and volatility spikes.

Outlook: What to Watch in the Next 6–12 Months

1. ETF flows & futures basis: Persistent ETF inflows and muted funding typically support rate compression for secured loans; a spike in basis/funding would push the other way.

2. Custody arms race: Expect more lenders to adopt client-key or verifiable custody—pressuring high-APR incumbents.

3. Macro divergences: Fed policy is currently steady; the BoE has cut. Cross-border borrowers may find cheaper fiat funding in some jurisdictions than others.

4. Regulatory clarity: Mainstream lenders entering BTC-backed credit could add depth and further narrow spreads for conservative, over-collateralized loans.

Practical Borrowing Framework (Step-by-Step)

1. Define the objective. Temporary liquidity? Tax? Real-estate bridge?

2. Pick your LTV. Start low (20–35%). Stress-test a 40–60% BTC drawdown.

3. Custody & rehypothecation. Prefer client-key multisig, no rehypo. Get it in writing.

4. Quote & compare APRs. Compare APR (incl. origination) across at least 3 providers.

5. Liquidation policy. Understand margin call thresholds, cure periods, and liquidation penalties in writing.

6. Funding runway. Keep dry powder to lower LTV if BTC drops.

7. Exit plan. Decide whether you’ll repay from cash flow, refinance, or sell other assets.

Bottom Line

Borrowers have more leverage in 2025—in the good way. With Unchained crossing $1B and cutting APRs, plus competitors publishing transparent mid-teens APRs at modest LTVs, the secured BTC loan market is increasingly mature, verifiable, and price-competitive. If you borrow, do it conservatively: low LTV, verifiable custody, no rehypothecation, and a clear plan for volatility.

Sources & Further Reading

• Unchained surpasses $1B and lowers APRs; client-key multisig, no rehypothecation.

• Galaxy Research: the state of crypto lending (CeFi/DeFi structure, custody, use-cases).

• CoinDesk: CME futures premium drops; funding subdued.

• Reuters: ETF inflows, institutional demand in 2025 rally.

• Ledn: BTC loan rate examples (starting ~11.4% interest; ≈13.4% APR).

• Unsecured lending remains expensive (20–30%+).

• Unchained loan mechanics & pricing notes.