How to borrow against your Ethereum

Borrowing against Ethereum means taking a loan that uses your ETH as collateral, without selling it. You pledge ETH you already own, borrow against a fraction of its value, and get your ETH back when you repay.

Although there are key differences, an easier way to understand a crypto loan is to think of it like a normal secured loan, but your collateral is your ETH instead of a house or a car.

The lender holds your ETH until you repay, and because the loan is backed by that collateral, there is typically no credit check.

Selling ETH ends your position and, in some places, can trigger a taxable sale. Borrowing lets you keep your exposure to ETH while still accessing value from it. That is a matter of convenience and staying invested.

You can borrow against ETH through a custodial platform, such as Kraken, that holds your collateral for you, or through a non-custodial DeFi protocol where a smart contract holds it instead. The trade-off is convenience and support versus self-management. If you are weighing who should hold your keys, our wallet guide breaks down both models.

Borrowing against Ethereum follows the same four steps on almost any platform.

1. Choose a platform and deposit ETH. Pick a custodial platform or a DeFi protocol, then deposit or pledge the ETH you want to use as collateral.

2. Pick your amount, within your limit. Decide how much to borrow, up to the maximum your collateral supports. Borrowing less leaves a bigger safety buffer.

3. Receive funds or buying power. Many platforms pay out cash or stablecoins. On Kraken, the borrowed amount becomes buying power inside the normal buy flow, so you can buy more ETH in one step.

4. Repay on your schedule. Repay in full or in part to lower what you owe and unlock your collateral.

You can see how this works in practice on Kraken Borrow, which folds borrowing into the buy flow so your ETH becomes buying power.

How much you can borrow depends on the value of your ETH and its haircut, up to a 1x cap in the EEA and ROW.

Loan-to-value (LTV) is your loan divided by your collateral’s value, as a percentage. A haircut discounts how much of your ETH’s market value counts as collateral, to leave room for volatility. Because LTV rises the moment ETH falls in price, borrowing well below the maximum keeps you safer. For the full LTV and liquidation mechanics, see our step-by-step guide.

Much Ethereum borrowing happens on DeFi rather than platforms such as Kraken.

The core difference between these two platform types comes down to how they handle custody and their technical complexity.

DeFi venues such as Aave, Sky, Maple and others are non-custodial, so a smart contract holds your collateral and you manage everything yourself through a wallet.

A custodial platform like Kraken holds your collateral for you, is simpler to use, and integrates borrowing with buying. DeFi platforms remove counterparty risk but add self-management and smart-contract risk. Meanwhile, centralized platforms introduce counterparty risk, but can be significantly easier to operate.

DeFi suits self-directed users who want to hold their own keys and are comfortable managing a position onchain. A custodial option suits people who want a simpler, supported experience and the ability to act on buying power in the same place.

ETH that you pledge as loan collateral generally cannot also be staked at the same time, because the same coins cannot back two commitments at once. If earning staking rewards matters more to you than borrowing right now, weigh that trade-off before you pledge ETH as collateral.

Borrowing against Ethereum can carry real risks that deserve as much attention as the benefits. The main one is the risk of liquidation, meaning the platform automatically sells your ETH to cover the loan if the value of Ethereum falls too far.

Because your loan is backed by a volatile asset, a large drop in ETH raises your LTV and can trigger liquidation. You could lose the ETH you posted, sold at a low price, which is the exact outcome most holders are trying to avoid.

Before liquidation, a margin call warns you to act. On Kraken, a margin call is triggered at 80% LMR and liquidation begins at 40% LMR. Sharp ETH moves can cross these levels quickly, so a thin buffer is risky.

Borrow well below your maximum LTV, keep spare ETH or cash you can add fast, and monitor your loan rather than setting it and forgetting it. Choosing a regulated, transparent platform with a track record reduces platform risk on top of that.

Whether borrowing against Ethereum is a good idea depends on your goal and your risk tolerance, so treat the below as considerations rather than advice.

It can make sense if you want liquidity or more ETH exposure without selling, you can borrow conservatively, and you are able to monitor and top up your collateral if ETH falls.

It may not make sense if you would need to borrow near the maximum, cannot watch the position, or would be forced to sell other assets to cover a margin call. In volatile conditions, the liquidation risk is real.

Ask how much buffer you have before a margin call, what happens if ETH drops sharply overnight, and whether you could repay or add collateral in time. If the answers make you uncomfortable, borrow less or not at all.

On Kraken, borrowing against Ethereum is built into the buy flow rather than run as a separate loan.

Your eligible ETH becomes buying power, so you can buy more in one flow: your cash is spent first, a crypto-backed loan covers the gap only if needed, and the rate and fees appear before you confirm.

Kraken-managed custodial wallets have never been breached since Kraken’s founding in 2011, and Kraken Borrow runs on that same infrastructure.

Kraken Borrow is available across the European Economic Area and several other supported markets. It is not available to clients in the US, the UK, Canada, Australia, or certain other regions at this time.