9 min readBorrowing Against Crypto vs Selling
Borrowing against crypto can raise cash while keeping exposure to the asset. Selling raises cash without creating a repayment obligation. The comparison depends on tax, borrowing costs, how long you need the money and how you will repay it.
Start with the same amount of usable cash on both sides. A loan's headline amount can overstate what reaches your account when a fee is deducted upfront. Equally, selling $50,000 of crypto may leave less than $50,000 after allowing for tax.
One Bitcoin, one cash requirement
Assume someone owns 1 BTC, bought for $40,000 and now worth $100,000. They need $50,000 of usable cash. The Bitcoin price is hypothetical, not a current market quote.
For the sale examples, assume a single cost basis and tax applied to the gain on the portion sold. Ignore allowances, losses, exemptions, trading costs and currency effects. The rates below are illustrative, not current tax bands or an estimate of any reader's liability.
For borrowing, assume no taxable disposal occurs when collateral is posted and that the loan remains in good standing. That tax assumption must be checked for the actual arrangement. The loan figures are indicative public quotes, not an approved offer.
01 / Follow the cash
Compare $50,000 in usable cash
Selling: allow for tax on the gain
In this example, 60% of each dollar of sale proceeds is gain: the $100,000 value exceeds the $40,000 cost basis by $60,000. The IRS explains that selling investment digital assets can give rise to a capital gain or loss, with basis and the units disposed of affecting the calculation. 1
To retain $50,000 after setting aside the assumed tax, the required gross sale is:
Gross sale = $50,000 ÷ (1 − 60% × illustrative tax rate).
| Illustrative tax rate | Gross sale | Tax set aside | BTC sold | Usable cash |
|---|---|---|---|---|
| 15% | $54,945 | $4,945 | 0.54945 | $50,000 |
| 20% | $56,818 | $6,818 | 0.56818 | $50,000 |
| 24% | $58,411 | $8,411 | 0.58411 | $50,000 |
Dollar amounts are rounded to the nearest dollar; BTC quantities are rounded to five decimal places. This is a reserve for a modelled tax liability, not an assumption that tax is withheld at the sale.
At the 20% rate, approximately 0.432 BTC remains. The portion sold no longer benefits from a price rise, but it is also no longer exposed to a price fall. The sale creates no loan principal to repay.
Borrowing: compare the net cash received
Arvexo's public terms state that its origination fee is deducted from the headline principal. A $50,000 loan with a 1% deducted fee therefore provides $49,500, not $50,000. 2
To receive $50,000 after that fee, the principal needs to be approximately $50,505.05. Arvexo's public 12-month quote retrieved on 21 September 2026 showed the following amounts. 3
| Item | Amount |
|---|---|
| Headline loan principal | $50,505.05 |
| Origination fee deducted upfront | $505.05 |
| Net cash received | $50,000.00 |
| Quoted interest over 12 months | $6,313.12 |
| Interest plus upfront fee | $6,818.17 |
The quote displayed an annual rate of 12.5%. Arvexo's interest guide describes daily accrual on outstanding principal. The fee is an additional cost, so the displayed rate alone should not be treated as a complete measure of borrowing cost. 4
The approximately $6,818 finance cost does not include returning the $50,505.05 principal. Under the stated interest-only structure, principal remains due at maturity. Final dates, rates, fees and the repayment schedule must be confirmed in the agreement. 2
02 / Look beyond the first year
Cost, time and collateral
Similar first-year costs do not mean the same outcome
The approximately $6,818 of one-year loan interest and fees is close to the modelled sale tax at 20%. At 15%, the sale tax is lower; at 24%, it is higher. This compares specific cash costs, not the full economic outcome.
A sale reduces the holding. A loan preserves exposure to the pledged Bitcoin while adding a debt and interest payments. Future prices, future tax, repayment funding and the risk of liquidation can change which option leaves the borrower better off.
Nor is a tax bill necessarily avoided forever. Selling crypto later to repay the loan can create a later tax liability. Deferring a sale and eliminating tax are different outcomes.
Time and repayment change the comparison
Interest continues while principal remains outstanding. A separate 36-month quote for the same principal, retrieved on the same date, showed $18,956.65 of interest. With the $505.05 upfront fee, that is approximately $19,462 in finance costs, with principal still to repay. 5
This uses the quoted total, rather than multiplying the one-year figure by three. Daily accrual, dates and rounding can affect the result. It assumes the stated loan term and payments, with no additional late, liquidation or refinancing costs.
A shorter loan may cost less in interest, but check any early repayment charge. Arvexo's early-repayment guide says a payoff quote includes principal, accrued interest and any applicable early repayment fee. 6
Before comparing a tax bill with a loan cost, identify the repayment source. Repayment from expected income, an asset sale or refinancing creates different risks. Refinancing should not be assumed to remain available on the same terms.
Do you have enough collateral?
For the $50,505.05 principal above, borrowing at 30% loan-to-value (LTV) would require approximately $168,350 of collateral. At the hypothetical $100,000 Bitcoin price, that is about 1.684 BTC — more than the holder owns.
Pledging the full 1 BTC would instead give a starting LTV of approximately 50.5%, assuming the loan is available on those terms. This is not the same risk position as borrowing at 30% LTV.
A lower LTV leaves more room for price falls, but does not remove risk. Falling prices can require a top-up or repayment, and collateral may be sold. Custody and lender failure are separate considerations. Read the margin calls and liquidation guide before relying on the borrowing option.
Is a crypto-backed loan a good idea?
The honest answer is "for some holders, in some situations". It tends to be a good idea when four things are true at once: the cash need is temporary, there is a repayment source that does not depend on the collateral's price, the financing cost is acceptable against the tax and exposure cost of selling, and the collateral can be pledged at a starting LTV well below the maximum. It tends to be a bad idea when any of those is missing, and a bad idea with certainty when the purpose is to buy more of the same asset.
The question people ask next, "is it better to borrow or sell", has no general answer; the table above is the way to get a specific one.
03 / Check the tax treatment
Borrowing does not settle the tax question
US tax: a loan is not a blanket exemption
IRS material explains the general principle that loan proceeds are not included in income because there is an obligation to repay. That principle does not, by itself, decide the treatment of every transfer in a crypto collateral arrangement. 7
IRS Notice 2024-57 addresses broker reporting for certain digital-asset transactions, including transactions described as lending. It explicitly says its descriptions do not determine their substantive federal income-tax treatment. It is not a ruling that all crypto-backed loans or collateral transfers are tax-free. 8
A tax adviser should assess the actual structure, any ownership transfer and the consequences of a collateral sale or debt cancellation. The illustrative tax rates in this article do not establish a US taxpayer's rate.
UK tax: ownership and the transaction date matter
HMRC's existing DeFi guidance says that allowing a platform to deal freely with collateral is a strong indicator that beneficial ownership has transferred. Where ownership transfers, posting collateral is a disposal for capital-gains purposes. Restrictions on the platform's use of collateral point in the opposite direction. 9
Where beneficial ownership remains with the borrower, HMRC treats a later collateral sale by the platform as the borrower's disposal. The manual describes HMRC's interpretation for DeFi arrangements; it is not a universal ruling on every centralised lending product. 9
There is also a dated policy development to consider. On 13 July 2026, HMRC announced a measure for certain cryptoasset loan and liquidity-pool arrangements, with effect from 6 April 2027. It would provide no-gain/no-loss treatment in specified circumstances. As of this article's 21 September 2026 review, that is a future regime, not a current blanket exemption. Do not assume a USD loan secured by Bitcoin qualifies. 10
Check the rules in force when the transaction occurs and how they apply to the particular contract. A lender's marketing description cannot settle the tax treatment.
04 / Make the comparison personal
Choose around the repayment plan
Borrowing may be worth considering when the cash need is temporary, there is a credible repayment source, the financing costs are acceptable and sufficient collateral is available without pushing LTV to its limit. Keeping exposure also means keeping the downside.
Selling may be worth considering when the cash is needed permanently, taking on debt would strain cash flow, or meeting a margin call would be difficult. A sale can reduce portfolio exposure as well as raise money; the tax cost still needs calculating.
A partial sale combined with a smaller loan is another possibility. It can reduce the debt required, but still involves sale costs, possible tax and ongoing loan risk.
Before deciding, write down five figures: usable cash required, sale proceeds after estimated tax and fees, loan proceeds after deductions, total financing costs and the amount due at repayment. Then test a lower asset price and a delayed repayment source.
Use the Arvexo calculator for an indicative estimate and read the LTV guide. Confirm the actual quote and loan terms, and discuss the tax position with a qualified adviser.
Collateral can fall in value and be sold. This article is for general informational purposes only and does not constitute financial, investment, legal, or tax advice.
Sources
- IRS — guidance on selling investment digital assets, capital gain or loss, basis and units disposed of.
- Arvexo — public terms: origination fee deducted from principal; interest-only structure, principal due at maturity.
- Arvexo — public 12-month quote, retrieved 21 September 2026.
- Arvexo — how interest is calculated: daily accrual on outstanding principal.
- Arvexo — public 36-month quote, retrieved 21 September 2026.
- Arvexo — early repayment: a payoff quote includes principal, accrued interest and any applicable early repayment fee.
- IRS — loan proceeds are not included in income where there is an obligation to repay.
- IRS Notice 2024-57 — broker reporting for certain digital-asset transactions, including digital asset lending. The notice states its descriptions do not determine substantive federal income-tax treatment.
- HMRC — Cryptoassets Manual, DeFi guidance on beneficial ownership and collateral.
- HMRC — tax treatment of cryptoasset loans and liquidity pools, announced 13 July 2026, with effect from 6 April 2027.
