The END of Crypto Loan Liquidations?
Borrowing against crypto has always come with one uncomfortable condition: if your collateral falls far enough, the protocol sells it. No court, no collections call, no negotiation. That single rule has kept most everyday users away from crypto lending. In this Friday DeFi session, we look at a product from Strike that removes the liquidation clause entirely — as long as you keep making your payments.
Why People Borrow Instead of Selling
The reason is simple: selling crypto is a taxable event. Sell a little this week, a little next week, and suddenly you have a spreadsheet full of disposals, cost basis questions, and gain calculations to untangle at year end.
Borrowing sidesteps that. Your Bitcoin or Ethereum stays where it is. Nothing is sold, so nothing is realized. You draw cash against the position and pay it back on your own schedule. It's the same logic stock investors use with margin loans, and the same logic real estate investors use when they pull equity out of a property instead of selling it.
If you're already holding long term and want to understand the mechanics before you borrow, it's worth reading through how to borrow against Bitcoin without selling it first.
How Liquidation Actually Works
Crypto loans are over-collateralized. Put up $20,000 of an asset, borrow $10,000. The protocol stays solvent because the collateral is always worth more than the debt.
The catch is volatility. If that $20,000 slides to $15,000, then $12,000, then $11,000, the loan-to-value ratio climbs toward the liquidation threshold. The protocol doesn't wait — it sells enough of your collateral to bring you back into compliance. Bitcoin's move from $120,000 down toward $60,000 is exactly the kind of drawdown that triggers this.
That means active management: logging in, watching your LTV, paying down principal before you get close. It's manageable if you know what you're doing, but it's a hard sell to the mainstream. Anyone using on-chain lending should understand how lending protocols price collateral and set LTV limits before depositing anything.
The Volatility-Proof Loan and the Line of Credit
Strike's announcement shows two things worth paying attention to.
First, a volatility-proof loan. The standard product carries a price-driven liquidation trigger around 70% LTV. The new one doesn't. Miss your payments and you can still lose the collateral — that's a normal loan — but a price swing alone won't force a sale. The trade-off is a higher APR and different terms. That's a reasonable price for removing the thing most borrowers fear.
Second, a line of credit against crypto. Instead of opening and closing loans repeatedly, you open one facility and draw only what you need. Interest accrues on the drawn balance and can roll into the principal, which means you can go long stretches without making a payment at all — the balance simply grows while your collateral, hopefully, grows faster.
Both products mirror what banks already do, but without the approval process, the credit pull, or the branch hours.
Don't Forget the Tax Side
Borrowing isn't taxable, but eventually you sell something — to close a loan, to rebalance, or to take profit. That's when cost basis records matter. If you've been moving assets between wallets, protocols, and exchanges, reconstructing that history under pressure is painful. A service like Count On Sheep is worth considering if you need help filing crypto taxes across DeFi wallets and lending positions, because loan activity and collateral movements are exactly the kind of transactions generic software mislabels.
This is what debanking looks like in practice: your assets stay yours, you access liquidity on your terms, and the protocol competes for your business instead of interrogating you about withdrawals. If you want to go deeper on DeFi lending, loan strategy, and the rest of the curriculum, the live sessions run Monday through Friday inside the crypto school — you can join and start working through the courses at skool.com/crypto-profit.
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