If you hold Bitcoin and need cash, the obvious move is to sell some. But selling is rarely the right answer. It ends your exposure to an asset you presumably bought because you believe in it long term, and in most jurisdictions it triggers a taxable event. There is another path: borrow against your Bitcoin and keep it.
This guide walks through how to borrow USDC against Bitcoin from start to finish — what you need, the exact flow on Merum, how loan-to-value and liquidation actually work, and how to repay and reclaim your collateral. It uses Merum’s real, current parameters throughout so the numbers you see here are the numbers you would model in the app.
Why borrow instead of sell
There are two durable reasons to borrow against Bitcoin rather than sell it.
You keep your upside. When you sell, you are out. If Bitcoin appreciates afterward, you no longer benefit. A loan lets you access dollars today while your full Bitcoin position keeps riding any future price appreciation. You are renting liquidity, not surrendering your stack.
You defer the taxable event. In most tax regimes, taking out a loan is not a disposal of the underlying asset, so it does not by itself create a capital gain. Selling does. We cover this in depth in BTC capital gains tax: how borrowing defers it — but the short version is that a collateralized loan generally lets you raise cash without realizing a gain on your Bitcoin. (This is general information, not tax advice; rules vary by country and circumstance, so confirm with a professional.)
Key takeaway: Selling ends your position and usually triggers tax. Borrowing keeps your Bitcoin, keeps your upside, and generally defers the taxable event — at the cost of interest and liquidation risk you have to manage.
The trade-off is real and worth stating plainly. A loan is not free money. You pay interest, and if the value of your collateral falls far enough relative to your debt, part of it can be liquidated. Borrowing makes sense when you are confident you can service or repay the loan and you want to avoid selling. It is not a way to take on leverage you cannot manage.
What you need before you start
There are three things to have ready.
1. Bitcoin in a form Merum accepts. Merum v1 accepts LBTC — Lombard’s wrapped Bitcoin — as collateral. LBTC is a 1:1 representation of Bitcoin that lives on-chain, secured by Lombard’s consortium custody and verifiable through on-chain attestations. If your Bitcoin is on a centralized exchange or in cold storage as native BTC, you will first convert or bridge it into LBTC. Lombard’s own minting flow and major liquidity venues both let you acquire LBTC; once you hold it, you control it in your own wallet.
2. A self-custody wallet on HyperEVM. Merum is non-custodial and runs on HyperEVM, Hyperliquid’s EVM layer. You need a wallet (such as MetaMask or any EVM-compatible wallet) configured for HyperEVM, holding your LBTC and a small amount of the network’s gas token to pay transaction fees. At no point does Merum take possession of your assets — your collateral sits in an audited smart contract that only you can act on.
3. A destination for your USDC. Decide what the borrowed USDC is for before you borrow. Paying an expense, funding a purchase, deploying into another strategy — knowing the purpose helps you size the loan sensibly rather than borrowing the maximum just because you can.
The Merum borrow flow, step by step
Here is the full lifecycle of a loan on Merum, from deposit to withdrawal.
Step 1 — Connect and deposit LBTC
Open the Merum app, connect your HyperEVM wallet, and open the LBTC–USDC market. Deposit the LBTC you want to use as collateral. This is a single on-chain transaction; your LBTC moves into the protocol’s collateral contract, where it is locked but still owned by you. You can add more collateral later, and you can withdraw any collateral that is not currently backing a loan.
Step 2 — Choose your loan-to-value
Loan-to-value (LTV) is the size of your loan relative to the value of your collateral. Merum’s maximum LTV on the LBTC–USDC market is 60%. That means against $100,000 of LBTC you can borrow up to $60,000 of USDC.
You almost never want to borrow at the maximum. A lower LTV gives you a wider safety buffer before liquidation becomes a risk. Most disciplined borrowers sit well below the cap — somewhere in the 30–50% range — precisely so that an ordinary pullback in Bitcoin’s price does not put them anywhere near trouble. The borrow calculator lets you drag the LTV slider and see your liquidation price update in real time before you commit.
Step 3 — Borrow USDC
Confirm the amount and execute the borrow. Native USDC lands in your wallet in the same transaction. The rate on Merum’s LBTC–USDC market is a fixed 7.9% APR, so you know your borrowing cost up front — it does not float with utilization the way variable-rate money markets do. Interest accrues continuously against your outstanding balance.
Step 4 — Monitor your position
Once you have an open loan, your job is to watch the relationship between your collateral value and your debt. Merum prices LBTC using an oracle, and your effective LTV moves as Bitcoin’s price moves: if Bitcoin falls, your LTV rises toward the liquidation threshold; if it rises, your LTV falls and your buffer grows. The app shows your current LTV, your liquidation price, and how much headroom you have. Set yourself a personal alert level well above the liquidation threshold so you are never reacting at the last second.
Step 5 — Repay
You can repay any portion of your loan at any time — there is no fixed term and no prepayment penalty. Repaying reduces your debt, lowers your LTV, and pushes your liquidation price further away. To close the loan entirely, repay the outstanding principal plus accrued interest in USDC.
Step 6 — Withdraw your collateral
Once your debt is fully repaid, your LBTC is unlocked. Withdraw it back to your wallet, convert it back to native Bitcoin if you wish, and you are exactly where you started — minus the interest you paid, plus whatever you did with the borrowed dollars in the meantime. Your Bitcoin never left your control, and you never sold.
Understanding LTV and liquidation
This is the part to internalize before you borrow a single dollar.
Maximum LTV (60%) is the most you are allowed to borrow at the moment you open or increase a loan. It is a ceiling on origination.
Liquidation threshold (75%) is different and more important. It is the LTV at which your position becomes eligible for liquidation. The gap between the 60% borrow cap and the 75% liquidation threshold is your built-in buffer: even if you borrowed the maximum, your collateral would have to lose a meaningful chunk of value before liquidation is on the table.
When your LTV reaches the liquidation threshold, a liquidator can repay part of your debt and claim a corresponding portion of your collateral (plus a liquidation penalty) to bring your position back to health. Liquidation is not a total loss of your collateral — it is a partial sale, forced and at a discount, that you generally want to avoid.
A worked example
Suppose Bitcoin trades at $100,000 and you deposit 1 LBTC, so your collateral is worth $100,000. You decide to borrow conservatively at 40% LTV, drawing $40,000 of USDC.
- Your annual interest at 7.9% is $3,160 ($40,000 × 0.079), accruing continuously.
- Your debt stays fixed at $40,000 (plus accrued interest); what moves is your collateral value.
- Liquidation is triggered when debt ÷ collateral value hits 75%. With $40,000 of debt, that happens when your collateral falls to about $53,333 ($40,000 ÷ 0.75).
- $53,333 is roughly a 47% drop in Bitcoin’s price — from $100,000 to about $53,300 per coin.
So a conservative 40% loan gives you a cushion of nearly half of Bitcoin’s value before liquidation enters the picture. Compare that to borrowing the full 60%: $60,000 of debt against $100,000 of collateral hits the 75% threshold once collateral falls to $80,000 — only a 20% drop in Bitcoin’s price. Same protocol, very different risk profile, entirely driven by how much you chose to borrow.
| LTV at origination | USDC borrowed | Liquidation collateral value | BTC price drop to liquidation |
|---|---|---|---|
| 30% | $30,000 | $40,000 | ~60% |
| 40% | $40,000 | $53,333 | ~47% |
| 50% | $50,000 | $66,667 | ~33% |
| 60% (max) | $60,000 | $80,000 | ~20% |
Figures assume $100,000 of collateral and Merum’s 75% liquidation threshold; interest accrual narrows these buffers over time and is not shown.
The lesson is simple: the lower your LTV, the larger the price move you can absorb. You control this dial entirely.
Repaying and managing the loan
Because Merum loans have no fixed term, you have a lot of flexibility:
- Partial repayment at any time lowers your LTV and widens your buffer.
- Adding collateral has the same protective effect without reducing your debt — useful if you want to keep the USDC deployed but de-risk the position.
- Full repayment closes the loan and frees all your collateral for withdrawal.
Interest accrues continuously rather than in monthly installments, so the longer you hold the loan, the more interest you owe. There is no penalty for holding it for years or for closing it the day after you open it — you simply pay for the time you use the capital.
Common questions
Do I lose custody of my Bitcoin? No. Merum is non-custodial. Your collateral sits in an audited smart contract; the protocol never takes possession, and only you can repay and withdraw. This is the structural difference between borrowing on Merum and borrowing from a centralized lender that holds your coins.
Why LBTC and not native Bitcoin? Bitcoin’s base layer cannot run the smart contracts a lending protocol needs. LBTC brings Bitcoin onto HyperEVM as a 1:1 wrapped asset so it can serve as programmable collateral. We explain the wrapping models and why Merum chose LBTC in LBTC explained.
Is the rate really fixed? Yes. Merum’s LBTC–USDC market carries a fixed 7.9% APR, so your cost of borrowing does not jump when the pool gets busy. Always confirm the live rate in the app before borrowing, as parameters can be updated by governance.
What if I never repay? Your loan stays open and accrues interest. As long as your LTV stays below the liquidation threshold, nothing forces the issue. If your collateral falls enough to breach the threshold, the position is liquidated to cover the debt. Repaying or adding collateral before that point keeps you in control.
Can I supply USDC instead of borrowing it? Yes — the other side of the market. If you hold USDC, you can supply it to earn yield paid by borrowers, backed by overcollateralized Bitcoin.
Putting it together
Borrowing USDC against Bitcoin comes down to a few decisions made well: convert your BTC into LBTC, deposit it as collateral, borrow at an LTV that leaves you comfortable headroom, watch your position, and repay on your own schedule to reclaim your coins. Done conservatively, it turns an illiquid long-term holding into spendable dollars without selling and without giving up custody.
If you want to see the exact numbers for your situation, model them in the borrow calculator or read the full market parameters on the LBTC–USDC market page.
This article is educational and not financial, investment, or tax advice. Borrowing against volatile collateral carries liquidation risk; never borrow more than you can comfortably manage, and confirm live protocol parameters in the app before transacting.