On Jan. 16, Coinbase reintroduced its service, allowing US users to borrow USDC using Bitcoin as collateral, marking a noteworthy expansion in the Bitcoin-backed loan market. The concept, while not new, is seeing renewed interest as market demand grows, with estimates predicting the market could expand from $8.6 billion in August 2024 to $45.6 billion by 2030. Bitcoin-backed loans offer a strategy for investors to unlock liquidity from their holdings without selling, potentially realizing significant cash flow. The repeal of the SAB 121 accounting rule on Jan. 23 has cleared the way for traditional banks to offer such loans, heightening the possibility of increased adoption among major financial institutions. There is currently a spectrum of 20 service providers, but the risks associated with Bitcoin-backed loans persist, especially in the wake of previous firm collapses like Celsius. Nevertheless, the growing involvement of traditional finance could signal a more secure environment for these loans and might lead to improved rates and conditions for users. Increased exposure and potential competition in the Bitcoin loan market are likely outcomes of these developments.

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