Spend Without Selling: Galaxy Turns BTC, ETH, SOL Into Personal Credit Lines

Original author: Xiao Bing

On Aug. 25, Galaxy Digital launched a Crypto Portfolio Line of Credit on its retail platform GalaxyOne. Users can use BTC, ETH, and SOL (including staked SOL) as mixed collateral to borrow USD or USDC at an annual interest rate of 8.99%, with no account opening fee, monthly interest payments, revolving credit, and instant funding. The initial collateral ratio is 50% (meaning $100,000 worth of crypto assets can borrow up to $50,000), and it is currently available in 40 U.S. states.

Galaxy explicitly promises that customers' collateral assets will not be rehypothecated, and staked SOL can continue to earn staking rewards.

This is a product aimed at retail users, but the question behind it concerns the next stage of competition for the entire crypto industry: Can on-chain assets become real-world purchasing power?

Product Breakdown

Galaxy's line of credit has several design features worth noting.

First, it is portfolio collateral, not single-asset collateral. Users can put BTC, ETH, and SOL into the same credit line without needing to apply for separate loans for each asset. This means the volatility risk of the collateral is somewhat diversified within the portfolio; if ETH falls but BTC rises, the overall collateral ratio of the portfolio may remain healthy.

Second, SOL is included as collateral, and staked SOL can also be used.

This is a clear statement by Galaxy on SOL's status as an institutional-grade asset. Previously, most crypto collateralized lending products only supported BTC and ETH. The inclusion of SOL and the "staking uninterrupted" design are directly attractive to Solana ecosystem holders.

Third, the 8.99% interest rate is not cheap.

Coinbase's crypto collateralized loan rate through Morpho is as low as 5% (but fluctuates with pool utilization), Ledn is about 10.4%, Figure is about 9.9%, Strike starts at about 9.5%, and Nexo advertises as low as 1.9% but requires holding NEXO tokens. Galaxy's 8.99% is in the middle of the market; its selling point is not the lowest price, but a fixed, predictable rate plus a no-rehypothecation safety commitment.

Fourth, the use of funds is unrestricted. Borrowed USD or USDC can be used for daily expenses, tax payments, home down payments, investment opportunities, or trading U.S. stocks and ETFs within the GalaxyOne platform. When Galaxy launched GalaxyOne in October 2025, it integrated crypto trading and U.S. stock trading functions, and the credit line product further connects the four links of "holding coins, borrowing, spending, and investing."

Who Needs This Product

The core user profile for crypto collateralized lending is: people who hold large amounts of crypto assets, do not want to sell (because they are bullish on long-term value or want to avoid triggering capital gains tax), but need short-term cash flow.

Under U.S. tax law, selling crypto assets is a taxable event. The long-term capital gains tax rate for holdings over one year can reach 20%, plus a 3.8% net investment income surtax, making the marginal rate close to 24%. If a holder has $1 million in unrealized BTC gains, selling could trigger over $200,000 in taxes. But if they use BTC as collateral to borrow $500,000, they gain liquidity without triggering a taxable event, and BTC continues to be held. The cost is about $45,000 in annual interest (8.99% × $500,000).

This calculation is favorable when BTC's appreciation exceeds the interest rate. In 2024 and 2025, BTC's annual returns far exceeded 8.99%. But if BTC enters a downtrend, borrowers face a double blow: asset depreciation + ongoing interest payments + possible margin calls or forced liquidation.

Galaxy's target customers are high-net-worth individuals, family offices, and founders. GalaxyOne Managing Director Zac Prince (former founder of BlockFi) said the product leverages Galaxy's institutional-grade infrastructure to serve retail clients.

Prince's background is worth noting: the BlockFi he founded was once a leader in the crypto collateralized lending market and went bankrupt in 2022 due to the FTX incident.

He is now rebuilding the same type of product at Galaxy, but emphasizes the safety bottom line of "no rehypothecation."

A Shrinking Market

Data from Galaxy's own research department shows that the crypto collateralized lending market is shrinking.

In Q1 2026, total crypto collateralized loans were $67.42 billion, down 5.1% from the previous quarter and down 14.3% from the peak of $78.67 billion in Q3 2025. Q2 further contracted to $56.16 billion, a quarter-over-quarter decline of 16.78%.

But from a longer time perspective, CeFi lending has rebounded 271.69% from the low of $6.8 billion in Q4 2023. The market is undergoing a reshuffle and consolidation in the "post-FTX, post-BlockFi" era, not a return to zero. Tether dominates the CeFi lending market with a 62.25% share, followed by Maple and Nexo.

Galaxy's choice to enter during a market contraction may have two rationales. First, contraction means competitors are exiting, making market share easier to gain. Second, Galaxy believes the demand for crypto collateralized lending is structural (tax avoidance + the need to hold coins without selling), and short-term market contraction does not change the long-term growth trend.

Crypto collateralized lending is a leveraged product, and its risk structure is the same as all leveraged products: it makes your assets more efficient when prices rise, and makes your situation worse when prices fall.

A 50% initial collateral ratio means that if the collateral value drops by more than 50%, the borrower may face a margin call or forced liquidation.

Galaxy has not yet publicly disclosed specific margin call thresholds and liquidation mechanisms, which is key information potential borrowers need to confirm before using the product.

The lessons of 2022 are still fresh.

BlockFi, Celsius, Voyager, and Genesis went bankrupt one after another, with the core reason being that when crypto asset prices plummeted, collateral values fell below loan amounts, triggering chain liquidations. Another common factor in the collapse of these platforms was rehypothecation: they took customers' collateral and invested it elsewhere, and when those investments lost money, they lacked sufficient assets to repay customers. Galaxy's commitment to no rehypothecation is a direct response to the 2022 disaster.

But no rehypothecation only solves platform-side risk, not borrower-side risk.

If BTC falls 40% to 50% from its current price, borrowers will still face margin call pressure. In extreme market conditions, being forced to sell collateral at a low point could result in greater losses than simply selling coins and paying taxes at the outset.

The 8.99% interest rate is also not zero cost. Holding an asset that generates no yield for a year while paying nearly 9% interest is a significant burden for most retail investors. This product is truly cost-effective only in a crypto bull market, when asset appreciation far exceeds interest costs. In a sideways or bear market, it is more like a liquidity trap.

The correct way to use crypto collateralized lending is as a short-term liquidity tool, not a long-term leverage strategy.