Not selling coins but still able to spend: Galaxy turns BTC, ETH, and SOL into personal credit lines
- Core Thesis: Galaxy Digital has launched a crypto-asset portfolio credit line product for retail users, allowing BTC, ETH, and SOL (including staked SOL) to be used as mixed collateral to borrow USD or USDC at an annual interest rate of 8.99%, with a commitment against rehypothecation. The product aims to convert on-chain assets into real-world purchasing power, and to compete during a contraction in the crypto-collateralized lending market by leveraging security commitments and institutional-grade infrastructure.
- Key Elements:
- The mixed collateral design supports BTC, ETH, and SOL (including staked SOL), with an initial loan-to-value ratio of 50%, covering 40 U.S. states with unrestricted use of funds, designed to diversify the risk of single-asset volatility.
- Staked SOL can continue to earn staking rewards without affecting the loan, which is an explicit recognition of SOL's status as an institutional-grade asset and holds direct appeal for holders within the Solana ecosystem.
- The fixed annual interest rate of 8.99% sits in the middle of the market (Coinbase at approximately 5%, Ledn at approximately 10.4%, Figure at approximately 9.9%). The core selling point is not the lowest price, but predictable rates combined with the security promise of "no rehypothecation."
- The product primarily targets high-net-worth individuals, family offices, and founders, whose core need is to avoid triggering capital gains tax (long-term rates up to nearly 24%) by selling crypto assets, while still gaining liquidity for spending or investment.
- The crypto-collateralized lending market is in a contraction phase: total loan volume in Q2 2026 stood at $56.16 billion, down 16.78% from Q1 and down 14.3% from the Q3 2025 peak; Tether dominates the CeFi lending market with a 62.25% share.
- The no-rehypothecation commitment is a direct response to the 2022 bankruptcies of platforms such as BlockFi and Celsius caused by rehypothecation and cascading liquidations, but it only addresses platform-side risk, not the downside price risk borrowers face from margin calls.
- A 50% initial LTV means that if collateral value drops more than 50%, margin calls or forced liquidations may be triggered. Galaxy has not yet disclosed specific margin call thresholds or liquidation mechanisms, and borrowers may face liquidity traps in bear markets or volatile sideways markets.
Original Author: Xiaobing
On August 25, Galaxy Digital launched a Crypto Portfolio Line of Credit on its retail platform GalaxyOne. Users can use BTC, ETH, and SOL (including staked SOL) as mixed collateral to borrow USD or USDC at an 8.99% annual interest rate, with no account opening fees, monthly interest payments, revolving credit, and instant disbursement. The initial loan-to-value (LTV) ratio is 50% (meaning up to $50,000 can be borrowed against $100,000 in crypto assets), and the product is currently available in 40 U.S. states.
Galaxy has made an explicit commitment: client collateral will not be rehypothecated, and staked SOL can continue to earn staking rewards.
This is a retail-facing product, but the questions it raises speak to the next phase of competition across the entire crypto industry: Can on-chain assets become real-world purchasing power?
Product Breakdown
Several design elements of Galaxy's line of credit are worth noting.
First, it uses portfolio-based collateral rather than single-asset collateral. Users can combine BTC, ETH, and SOL within a single line of credit without needing to apply for separate loans for each asset. This means volatility risk is diversified to some degree within the portfolio—if ETH drops but BTC rises, the overall collateral ratio of the portfolio may remain healthy.
Second, SOL is included as eligible collateral, and staked SOL can also be used.
This is a clear statement from Galaxy regarding SOL's status as an institutional-grade asset. Previously, most crypto-collateralized lending products only supported BTC and ETH. The inclusion of SOL and the "staking uninterrupted" design hold direct appeal for Solana ecosystem holders.
Third, the 8.99% interest rate is not cheap.
Coinbase offers crypto-collateralized lending rates as low as 5% via Morpho (though the rate floats with pool utilization), Ledn charges approximately 10.4%, Figure around 9.9%, Strike starts at roughly 9.5%, and Nexo advertises rates as low as 1.9% but requires holding NEXO tokens. Galaxy's 8.99% sits in the middle of the market—its selling point is not being the lowest price, but rather a fixed, predictable rate combined with the safety commitment of no rehypothecation.
Fourth, there are no restrictions on how the borrowed funds are used. The borrowed USD or USDC can be used for everyday expenses, tax payments, down payments on a home, investment opportunities, or trading U.S. equities and ETFs within the GalaxyOne platform. When Galaxy launched GalaxyOne in October 2025, it already integrated crypto trading with U.S. equity trading—the line of credit product now connects the four links of "holding, borrowing, spending, and investing" in one seamless loop.
Who Needs This Product
The core user profile for crypto-collateralized lending is: someone holding significant crypto assets who does not want to sell (due to long-term conviction or to avoid triggering capital gains tax) but needs short-term cash flow.
Under U.S. tax law, selling crypto assets is a taxable event. Long-term capital gains rates for assets held over one year can reach 20%, and with the 3.8% Net Investment Income Tax, the marginal rate can approach 24%. If a holder has $1 million in unrealized BTC gains, selling could trigger over $200,000 in taxes. But if they borrow $500,000 against their BTC instead, they gain liquidity without triggering a taxable event, and they continue to hold their BTC. The cost is roughly $45,000 per year in interest (8.99% × $500,000).
This trade-off makes sense when BTC's appreciation exceeds the interest rate. In 2024 and 2025, BTC's annual returns far surpassed 8.99%. But if BTC enters a downtrend, borrowers face a double whammy: asset depreciation + ongoing interest expenses + the potential for margin calls or forced liquidation.
Galaxy's target clients are high-net-worth individuals, family offices, and founders. GalaxyOne Managing Director Zac Prince (former founder of BlockFi) stated that this product leverages Galaxy's institutional-grade infrastructure to serve retail clients.
Prince's background is worth mentioning. He founded BlockFi, which was once a leader in the crypto-collateralized lending market before collapsing in 2022 due to the FTX fallout.
He is now building the same type of product at Galaxy, but with an added emphasis on the safety guardrail of "no rehypothecation."
A Market in Contraction
Data from Galaxy's own research division shows that the crypto-collateralized lending market is shrinking.
In Q1 2026, total crypto-collateralized loans stood at $67.42 billion, down 5.1% quarter-over-quarter and 14.3% below the Q3 2025 peak of $78.67 billion. Q2 contracted further to $56.16 billion, down 16.78% quarter-over-quarter.
However, on a longer time horizon, CeFi lending has rebounded 271.69% from the Q4 2023 low of $6.8 billion. What the market is experiencing is a post-FTX, post-BlockFi shakeout and consolidation—not a return to zero. Tether dominates the CeFi lending market with a 62.25% share, followed by Maple and Nexo.
Galaxy's decision to enter during a market contraction likely stems from two considerations. First, contraction means competitors are exiting, making market share easier to capture. Second, Galaxy believes the demand for crypto-collateralized lending is structural (the hard requirement of avoiding taxes while holding assets), and short-term market contraction does not change the long-term growth trend.
Crypto-collateralized lending is a leveraged product, and its risk structure is the same as all leveraged products: it makes your assets more efficient on the way up, and your situation worse on the way down.
A 50% initial LTV ratio means that if collateral value declines by more than 50%, borrowers could face margin calls or forced liquidation.
Galaxy has not yet publicly disclosed its specific margin call thresholds or liquidation mechanics—key information potential borrowers should confirm before using the product.
The lessons of 2022 are still fresh.
BlockFi, Celsius, Voyager, and Genesis all went bankrupt in succession. The core cause in each case was that when crypto prices crashed, collateral values fell below loan amounts, triggering cascading liquidations. Another common thread in these platform failures was rehypothecation—they took client collateral and deployed it in other investments, and when those investments lost money, they lacked sufficient assets to repay clients. Galaxy's commitment to no rehypothecation is a direct response to the 2022 catastrophe.
But avoiding rehypothecation only addresses platform-side risk—it does not address borrower-side risk.
If BTC drops 40% to 50% from current levels, borrowers will still face margin call pressure. In extreme market conditions, being forced to sell collateral at the bottom could result in losses greater than simply selling the assets and paying taxes upfront.
The 8.99% interest rate is also not zero cost. Holding an asset that generates no yield for a full year while paying nearly 9% in interest is a significant burden for most retail investors. Where this product truly makes sense is in a crypto bull market, where asset appreciation far exceeds the interest cost. In a choppy or bear market, it functions more like a liquidity trap.
The correct way to use crypto-collateralized lending is as a short-term liquidity tool, not a long-term leverage strategy.
