Using bitcoin as collateral means pledging your BTC as a guarantee for a loan - just like you’d use a house, car, or gold in traditional finance. But unlike those assets, bitcoin is digital, liquid, borderless, and settled in minutes. That makes it a powerful form of collateral in the age of internet-native money.

When you use bitcoin as collateral, you don’t have to sell it to access cash. Instead, you lock it up - usually in a secure, auditable wallet controlled by the lender (or in a multisig setup) - and receive a loan based on its current market value. This allows you to hold onto your long-term position while covering short-term liquidity needs.

The Loan-to-Value ratio (LTV) determines how much you can borrow. A typical LTV is around 50% - so if you pledge R1 million worth of BTC, you can borrow up to R500,000. If BTC’s price drops and your LTV rises too high, you’ll need to top up your collateral or risk liquidation.

Bitcoin’s volatility is both the strength and challenge here. It’s highly portable, divisible, and easy to verify - but price swings mean lenders need protection, and borrowers need to stay alert.

Key concepts:

• Non-custodial vs custodial: Some lenders hold your BTC; others let you co-sign in a multisig vault.

• Liquidation threshold: The price level at which your BTC may be sold to cover the loan.

• Custody risk: If you don’t control the keys, you must trust the platform’s security and integrity.

In simple terms: Bitcoin as collateral means locking up BTC to borrow cash without selling. It’s fast, efficient, and trust-minimized - if you manage your risk and understand the custody setup.