Bitcoin pledged as loan collateral in Morpho's main Base market has doubled this year to about 39,800 coins, backing a record $1.6 billion in stablecoin loans.
Key Facts
Bitcoin collateral in Morpho's cbBTC lending market on Base rose from about 20,300 coins on Jan. 1 to about 39,800 on Tuesday, Morpho data show.
Loans against it grew 55% this year to a record $1.6 billion, leaving debt at about 48% of collateral value, close to what Galaxy found for similar Aave loans.
About 9% of that debt would face liquidation if Bitcoin fell 20%, and about a quarter if it fell 30%, by CoinMarketCap's count of Morpho position data.
Bitcoin (BTC) holders have pledged about twice as many coins to Morpho's main lending market on Base this year, Morpho data show. The loans drawn against those coins grew about half as fast.
The market, which powers Coinbase's Bitcoin-backed loans, now holds a record $1.6 billion in stablecoin loans. Much of the demand comes from Coinbase customers, Delphi Digital said on Monday. With debt at about half the value of the collateral, only a small share of it would face forced selling in a further steep drop, by CoinMarketCap's count.
Jacob Frantz, yield and investments product lead at Coinbase, pitches the loans as a way to raise cash and keep the Bitcoin.
“Coinbase Borrow gives our customers access to liquidity without having to sell their assets,” Frantz said in September, according to The Block.
How Much Are Bitcoin Holders Borrowing? A Record $1.6 Billion
Morpho is a lending protocol. Depositors supply USD Coin (USDC), and borrowers take it out by locking up Coinbase Wrapped BTC (CBBTC), a token backed one-for-one by Bitcoin.
Borrowing in the market has grown 55% since Jan. 1, Morpho's data show. It kept rising in October, even with Bitcoin down from a year earlier.
The cost of borrowing has also fallen over the past year, to about 5%.
Who Is Borrowing? Mostly Coinbase Customers, Delphi Says
Coinbase customers had more than $1.4 billion in variable-rate loans outstanding in September, Delphi wrote. They borrow through the Coinbase app, which routes the loans to Morpho.
“Those customers are using DeFi lending without ever touching it directly,” the research firm wrote.
Coinbase added fixed-rate Bitcoin loans through Morpho on Sept. 22, with the rate and repayment date set upfront.
The market also anchors Morpho's lead in DeFi lending on Base. Morpho's loans there across all assets are several times Aave's, DefiLlama data show.
Are the Loans Safe? Debt Is Near Half of Collateral
A loan in the market can be liquidated once the debt reaches 86% of the value of the Bitcoin behind it. Outside traders can then repay the loan and claim the borrower's Bitcoin at a discount, and often sell it.
Across the market, debt sits well below that line, at about half of collateral.
Galaxy Research found a similar cushion on Aave in its latest quarterly report. Loans that borrow dollars against assets such as cbBTC averaged debt near 49% of their collateral.
When Would Forced Selling Start? Below About $66,000
About 9% of the debt would reach liquidation if Bitcoin fell to about $66,000. A quarter would reach it below about $57,800, by CoinMarketCap's count of the market's largest positions in Morpho data.
Forced selling has hit the market before. About $97 million of loans were liquidated on Feb. 5, during a sharp sell-off, Morpho data show.
That drop drove record liquidations across Coinbase's loan book, Decrypt reported.
Borrowing is at a record. Forced selling has yet to return, with almost no liquidations since July.
“Onchain lending contracted for a third straight quarter but is exhibiting signs of a gradual deleveraging that were not present in the 2022 bear cycle,” Galaxy Research wrote in August.
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