Bitcoin-backed lending is experiencing increased popularity as holders look to leverage their assets without selling. As of 2024, the market is valued at approximately $8.6 billion and is projected to grow significantly by 2030. Key benefits include accessing liquidity without triggering capital gains taxes, as loans against Bitcoin do not count as taxable events under U.S. law. Leading institutions such as Ledn are facilitating this, with substantial loan origination volumes. Bitcoin's unique attributes—its liquidity, universal value, and security—make it ideal collateral. Comparatively, Bitcoin-backed lending is more streamlined than traditional loans, with no credit checks required, allowing faster access to funds. The lending space is divided between centralized finance (CeFi) platforms, which offer structured and legally protective environments, and decentralized finance (DeFi) platforms, which provide greater autonomy but carry additional risks, including potential tax implications from wrapping Bitcoin for DeFi use. Ultimately, choosing a reliable lending partner is critical for minimizing risks associated with both CeFi and DeFi lending.

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