Bitcoin's value is still below $60,000, but lending against it has bounced back as Wall Street credit takes the lead. According to Silicon Valley Bank (SVB), the total value of crypto-backed loans rose 49% in Q1 to around $67 billion. This surge comes after a period where lenders shifted away from failed cryptocurrency firms and towards overcollateralized lending, bank lines, and rated Asset-Backed Securities (ABS). SVB also stated that top banks such as JPMorgan Chase, Wells Fargo, Citigroup, Charles Schwab, and Morgan Stanley are now lending against bitcoin products mainly through ETFs.
The model for lending has shifted from relying on retail deposits and broad balance-sheet risk to collateral, custody, and institutional funding. SVB highlighted the importance of loan terms, citing that a lender who requires 200% collateral and liquidates at an 80% loan-to-value gets a 37.5% price cushion before forced selling.
Galaxy Digital's research showed that CeFi borrows made up $25.43 billion of the total crypto-collateralized lending market, while DeFi lending apps held $28.22 billion and collateralized debt position stablecoins took 20.43%. SVB also noted that backup servicing is now a key feature in ABS deals, with Zaria acting as the backup servicer for Ledn's recent $188 million bitcoin-backed ABS.