tl;dr
Coinbase hits $1B in Bitcoin-backed loans, setting a $100B lifetime target. The platform uses cbBTC collateral and Morpho's blockchain for flexible lending, balancing innovation with risks like volatility and liquidity constraints.
**Coinbase Surpasses $1 Billion in Bitcoin-Backed Loans, Sets Ambitious $100 Billion Target**
In a significant milestone for the cryptocurrency lending sector, Coinbase has surpassed **$1 billion in on-chain Bitcoin-backed loan originations** just eight months after launching its product in January 2025. The company’s CEO, Brian Armstrong, has set an audacious goal: **$100 billion in lifetime loan originations**. This achievement underscores the growing demand for decentralized lending solutions and Coinbase’s strategic pivot into the asset-backed finance space.
### How Coinbase’s Bitcoin-Backed Loans Work
Coinbase’s lending product leverages **cbBTC** (Coinbase-wrapped Bitcoin), a tokenized form of Bitcoin that is 1:1 collateralized by the asset under custody. Borrowers post cbBTC as collateral on the **Morpho market** hosted on the Base blockchain, where variable interest rates are set every block based on utilization. Once approved, **USDC** is disbursed to the borrower’s Coinbase account.
Key features of the product include:
- **Liquidation Threshold**: Loans are automatically liquidated if the **loan-to-value (LTV) ratio reaches 86%**, with a **4.38% liquidation penalty**.
- **Over-Collateralization**: Borrowers must maintain excess collateral at all times, though the service is currently **excluded in New York** due to regulatory constraints.
- **No Fixed Repayment Schedule**: Borrowers can repay loans at any time, offering flexibility.
### The $100 Billion Target: Growth Projections and Challenges
Coinbase’s current run rate of **$125 million per month** implies a path to its $100 billion target, but the journey requires sustained growth. According to calculations:
- **Reaching $100 billion by 2030** would require **7.7% monthly compounded growth**.
- A 2029 target would demand **9.6% monthly growth**, while hitting the goal by **2027** would necessitate a staggering **21.2% monthly growth**.
Such rates hinge on **increased dollar liquidity** in Morpho markets on Base, larger loan sizes, and broader adoption. The number of loans needed to meet the target **declines sharply as average ticket sizes rise**, emphasizing the importance of scaling both collateral and USDC supply.
### Risk Factors and Market Context
Coinbase’s model is not without risks. **Collateral price volatility** and **liquidity constraints** during utilization spikes could strain the system. For example:
- A borrower entering at a **30% LTV** would need Bitcoin prices to drop **65%** to trigger liquidation, while a **50% LTV** borrower faces a **41.9%** threshold.
- **Rate sensitivity** also plays a role: Morpho’s block-level interest rates can surge during high USDC demand, impacting borrowers with large, long-term loans.
Despite these challenges, the macro environment is favorable. Decentralized lending (DeFi) saw **$26.47 billion in outstanding loans** in Q2 2025, a 42% quarter-over-quarter increase. Traditional finance is also embracing asset-backed structures, with firms like **KKR raising $6.5 billion for asset-based finance** this year.
### The DeFi Mullet Model and Broader Implications
Coinbase’s approach combines **traditional finance (CeFi) user experience** with **blockchain efficiency**. Borrowers interact via familiar interfaces, while lending, collateralization, and liquidations occur on-chain via Morpho. This “**DeFi mullet**” model—front-end simplicity with back-end decentralization—has enabled partner-led inflows without requiring users to navigate complex DeFi protocols.
The product also draws lessons from the 2022 crypto crash, where centralized lenders faced stress from **collateral concentration and maturity mismatches**. Coinbase’s on-chain collateral handling and automated liquidation mechanisms aim to mitigate such risks, though **dollar liquidity during stress events** remains a critical variable.
### Tracking the Path Forward
To gauge capacity and execution reliability, Coinbase and partners monitor **Base blockchain activity**, **bridged total value locked (TVL)**, and **Morpho market utilization**. These metrics provide real-time insights into liquidity, collateral recycling, and liquidation efficiency—key factors for scaling the product.
As Coinbase aims to redefine lending through Bitcoin-backed loans, its success will depend on **balancing innovation with risk management**. With a clear target and a robust technical foundation, the company is positioning itself at the intersection of crypto and traditional finance, setting the stage for a new era of asset-backed digital lending.