Where does your Bitcoin actually go when you borrow against it?

Oct 6, 2026 6:47 PMPublished Oct 6, 2026 6:47 PM

Your Bitcoin isn't yours the moment you use it as collateral. With $56 billion currently locked in lending markets, many borrowers are unknowingly exposed to "onward lending" where their assets are handed to third parties for interest. If those counterparties default, your collateral vanishes, leaving you as an unsecured creditor in bankruptcy—exactly what happened with Celsius and BlockFi. Is the temporary cash flow worth the risk of losing your Bitcoin forever?
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A borrower posts Bitcoin, gets dollars. But where does the collateral actually go? This piece follows the asset through three lending models and explains who holds it, who can use it, and how it comes back.

www.thestreet.comWhere does your Bitcoin actually go when you borrow against it? A borrower posts Bitcoin, gets dollars. But where does the collateral actually go? This piece follows the asset through three lending models and explains who holds it, who can use it, and how it comes back.

Bitcoin Backed Loans •Loans •Defi

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