Will the Fed focus on the breakevens, which are already at or below 2% at the short end, or on rising consumer concerns?
The Fed itself tends to trust breakevens because they reflect institutional capital allocation, while consumer surveys frequently lag behind and can be heavily influenced by volatile everyday costs like energy and food. Hence, the argument that falling breakevens are bullish for bitcoin still holds.
But the central bank may not entirely ignore Main Street sentiment, which can become self-reinforcing, especially if catalysts like energy prices remain volatile.
And guess what? The U.S.-Iran ceasefire has collapsed. The two sides exchanged airstrikes early today, triggering a roughly 5% jump in oil benchmarks. Bitcoin has fallen back to $62,000 and may drop further if the panic spreads to Wall Street later today.
Analysts are also watching the minutes from the Fed’s June meeting, due later today.
“Wednesday’s Fed minutes are the pin. With longs this crowded and funding this rich, a hawkish read is exactly the spark that flushes leverage, and the Strategy authorization hangs over every rally. We respect the bounce, we do not trust it, and we keep size honest into the minutes,” analysts at Marex said in an email.
Total crypto short liquidations for the 24 hours to the time of writing were just over $100 million, CoinGlass reports.
BTC/USD vs. crypto liquidation history (screenshot). Source: CoinGlass
Commenting on low time frames, X account Exitpump was among those attributing the moves to liquidity hunts.
“Seeing aggressive selling from spot markets, spot CVD (yellow) trending down while perps CVD (blue) is flat,” they reported on Monday, referring to cumulative volume delta on exchange order books.
BTC/USD chart with order-book data. Source: Exitpump/X
In the event of a reversal downward, trader Killa called the zone between $60,400 and $60,900 Bitcoin’s “most important.”
“If we cannot hold this price region on a revisit, I’m afraid we are going to trend directly to the lows again. Something to watch out for next week,” the analyst told X followers.
BTC/USD chart. Source: Killa/X
As Cointelegraph continues to report, market participants still see Bitcoin’s bear-market low as yet to come — despite a growing number of bullish trend reversal signals.
Trader Roman, who was long bearish on BTC/USD, stayed optimistic on longer time frames this week.
“Still looking excellent to continue our reversal to see higher prices in the interim,” an X post read.
“I still have a feeling we put in one more macro low before the bottom is officially in, but there are dozens of macro reversal signs all over HTF.”
BTC/USDT one-week chart. Source: Roman/X
Retail risk appetite hits record levels
Bitcoin’s waning ability to copy equities is under the microscope this week as US stock futures start higher after the holiday weekend.
While BTC/USD managed a trip to near two-week highs, Nasdaq 100 futures added 1% as analysts remain bullish on the broader US outlook.
“Although the S&P 500 is coming off a hot second quarter with a 15% gain, the index topped in early June and has yet to make a new high,” trading resource Mosaic Asset Company wrote in the latest edition of its regular newsletter, The Market Mosaic.
“But the S&P 500 trading within a bullish continuation pattern and has been finding support at a key level.”
S&P 500 market data. Source: Mosaic Asset Company
Mosaic added that the average stock “has been rallying to new record highs.”
“That includes the equal-weight S&P 500, small-cap stocks with the Russell 2000 Index, and the NYSE advance/decline line. New highs minus new lows across major exchanges are jumping higher as well,” it noted.
As Cointelegraph reported, recent US inflation and labor-market data helped soften markets’ hawkish expectations for Federal Reserve policy last week.
The latest data from CME Group’s FedWatch Tool sees the Fed holding interest rates at current levels in both July and September.
Fed target rate probabilities (screenshot). Source: CME Group
Another potential macro tailwind for Bitcoin comes in the form of retail investor demand for risk — despite the cohort’s crypto exodus this year. Analyzing options data, trading resource The Kobeissi Letter described retail risk appetite as being “at record levels.”
“Retail demand for short-term options has never been higher,” it reported on X.
This week, the Fed will release the minutes of its June meeting, where it likewise kept rates steady. Markets will also react to Purchasing Managers Index (PMI) numbers, along with more employment data releases.
“We expect another volatile week ahead as markets brace for earnings season,” Kobeissi added.
Warning over pre-midterm stock market correction
Looking ahead, not all market participants are convinced that the persistent stocks bull market will last. Among them is Andre Dragosch, European head of research at crypto asset manager Bitwise.
“What if there is a bigger stock market correction right before the Midterms?” he queried in X posts on Monday, referring to upcoming US elections.
Dragosch flagged the latest data from the MacroQuant Equity Risk Model by macro analytics company BCA Research. This, he warned, was “flashing a bear market warning signal.”
An accompanying chart likened current readings to those last seen in late 2021, when Bitcoin saw the top of its previous bull market.
Source: Andre Dragosch/X
In an extended X post last week, Dragosch nonetheless reasoned that crypto markets had already priced in much of the worst-case scenario that could hit macro in the future: a stock market comedown and a US recession.
“In other words, even if a AI crash and a subsequent US recession materialized, much of that pain appears to be already reflected in Bitcoin prices, which points to reduced downside from here,” he summarized.
Dragosch gave Bitcoin a “decent chance” of outperforming the Nasdaq “on a relative basis over the coming months.”
Whales lead exchange inflow drop
New data reveals that Bitcoin investors cooled selling significantly in the second half of June — even as price set new multi-year lows.
In a QuickTake blog post, onchain analytics platform CryptoQuant confirmed that inflows to exchanges had decreased from both retail and whale investors alike.
“Bitcoin whale activity on Binance has cooled sharply since mid-June, with the rolling 30-day value of whale inflows falling by nearly $2.4 billion,” contributor Amr Taha confirmed.
Retail investor inflows displayed a shallower rate of decline, falling from $10.02 billion on June 12 to $8.2 billion on July 6.
“Whale inflows fell at nearly twice the rate of retail inflows, reducing the relative role of large holders in exchange-bound Bitcoin supply. Meanwhile, the gap between retail and whale inflows widened from about $2.98 billion to $3.55 billion,” Taha continued.
Bitcoin whale exchange flows to Binance (screenshot). Source: CryptoQuant
Earlier, Cointelegraph reported on whales’ overall market conviction improving around the lows.
CryptoQuant notes that exchange inflows are not an infallible signal of investors’ intent to sell.
“The key question now is whether Binance whale inflows stabilize around the current $4.65 billion level or continue moving lower,” Taha concluded.
“A further decline would reinforce the view that large Bitcoin holders are becoming less active on the exchange compared with the retail cohort.”
Crypto market fear “easing, not gone”
Bitcoin’s modest recovery was enough to boost crypto market sentiment considerably this week.
The latest readings from the Crypto Fear & Greed Index show that aggregate sentiment is on the verge of exiting “extreme fear” for the first time in over a month.
Fear & Greed measured 24/100 on Monday, more than double its score at the start of July.
“That’s a clear improvement from recent lows. But the market is still in Extreme Fear,” trader Master of Crypto responded on X.
“Fear is easing, not gone.”
Crypto Fear & Greed Index (screenshot). Source: Alternative.me
As a lagging indicator, Fear & Greed tends to mirror existing shifts in market behavior post factum. While the Index is calculated based on a basket of factors, it lacks the ability to predict future trend continuation.
In his latest analysis published this week, commentator and blockchain advisor Anndy Lian argued that Bitcoin bulls needed to back up their optimism with tangible price moves.
“A successful breakout above that US$65,000 threshold would open the door to a broader test of the 100-day moving average, which currently hovers near US$69,500,” he wrote.
“Conversely, failing to sustain the current momentum carries severe downside risks.”
Vanguard, one of the world’s largest asset managers and a longtime skeptic of cryptocurrency, has opened a search for a head of digital assets, a senior role that would shape the firm’s strategy across crypto and blockchain-based finance.
The job, posted this week within Vanguard Personal Wealth and based in Dallas, calls for an executive to develop the firm’s digital asset vision, identify business opportunities, and lead execution across product, technology, operations, legal, and compliance teams.
According to the posting, the hire would serve as Vanguard’s “senior subject matter expert,” advise senior leadership on market developments, and represent the firm in discussions with regulators and industry groups.
Vanguard also wants the executive to help shape “market standards” and build a scalable, end-to-end strategy for personal wealth clients.
The listing extends beyond crypto trading. It names tokenization, stablecoins, digital wallets, custody, and blockchain-based settlement as areas the new leader would evaluate, along with deciding whether Vanguard should build capabilities in-house, partner with outside firms, or hold off on entering parts of the market.
The role would involve constructing a multi-year roadmap and designing governance and risk frameworks.
Vanguard’s journey into bitcoin
Vanguard reported $12 trillion in assets under management at the end of 2025, a scale that places it second only to BlackRock.
The move appears to mark the first time the firm has sought to hire someone dedicated to cryptocurrency strategy, and it comes after years in which the bank stood apart from rivals. BlackRock, Fidelity, and Franklin Templeton rolled out spot Bitcoin exchange-traded funds and other blockchain products while Vanguard declined to follow.
The firm’s public posture has been pointed. Vanguard has described Bitcoin as an “immature asset class” ill-suited to long-term investors.
Chief Executive Salim Ramji, who joined the company from BlackRock in July 2024 after leading its iShares business — the unit behind the large iShares Bitcoin ETF — has said the decision not to launch a Bitcoin ETF was “entirely consistent” with the firm’s investment philosophy, stressing the value of consistency in the products a firm offers.
Even so, Vanguard has not stayed on the sidelines entirely. In December, the firm began allowing brokerage clients to trade cryptocurrency ETFs and mutual funds on its platform, a shift that opened access to funds holding Bitcoin and some other crypto.
At one point last year, the bank also became the largest shareholder in Strategy, the company that holds the world’s biggest corporate Bitcoin treasury — a position that flowed from its index funds rather than an active bet on the asset.
The new search does not signal an imminent product launch, and Vanguard has maintained that it has no plans to issue its own crypto investment vehicles.
What the posting does suggest is a broadening of focus beyond simply granting access to third-party funds, toward assessing how digital assets might fit within its wealth management business over the long term.
The US Commodity Futures Trading Commission has sued a North Carolina man, accusing him of operating a commodity pool featuring crypto that defrauded investors of more than $14 million.
The CFTC’s lawsuit, filed in federal court on Tuesday, alleged that Trevor Vernon and his company, Argent Capital Management, operated a commodity pool featuring equity index futures, options on equity index futures and crypto.
The agency alleged that from March 2022 to February 2026, Vernon solicited $14.8 million from at least 60 investors and falsely claimed he was a successful trader, even though his trading actually “resulted in consistent and catastrophic losses” for the pool’s investors.
The lawsuit is a rare crypto-related enforcement action from the CFTC, which is angling to oversee the crypto industry while facing questions from some lawmakers about whether it has the resources to police the complicated and rapidly growing sector.
The agency alleged that as part of the scheme, Vernon traded crypto, including Bitcoin (BTC) and Ether (ETH), which the CFTC asserted were commodities.
CFTC alleges Vernon ran pool “akin to a Ponzi scheme”
The CFTC alleged in its complaint that Vernon made false statements to existing and potential investors, including in quarterly account updates and monthly performance emails.
The agency claimed Vernon’s trading of crypto, as well as futures and options on stock indices, resulted in losses of more than $8.6 million.
Related: CME Group sues CFTC over crypto perpetual futures
The CFTC said Vernon never disclosed the losses to investors and alleged he misappropriated $3 million to pay investors “in a manner akin to a Ponzi scheme” to hide his losses. He also allegedly misappropriated $136,000 for private air travel, according to the lawsuit.
The CFTC accused Argent Capital Management of failing to register with the agency as required by federal commodities law, and claimed Vernon made false statements to the regulator in January about the issues alleged in its complaint.
The CFTC charged Vernon with seven counts related to fraud, failure to register and making false statements.
It asked the court to permanently ban Vernon from registration and trading, along with disgorgement, penalties and restitution.
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The XRP Ledger’s newest server software, v3.2.0, designed to make the network cheaper to run, more stable, and more attractive for institutional use, is gaining adoption. However, it has yet to overtake the previous version (3.1.3) across the wider network, and the key security fixes that come with it remain in the voting process.
Of the approximately 833 active nodes on the XRP Ledger, the machines that store and relay the ledger, about 43% are running v3.2.0 and 51% are still on v3.1.3, XRPSCAN data shows.
While overall node adoption appears relatively slow, validators, or entities that matter most to the network, have largely already upgraded.
The XRP Ledger runs on a trusted set of validators known as the Unique Node List (UNL). For a new software version or amendment to activate, it needs sustained support from more than 80% of validators on that list for two straight weeks.
On the default UNL of 35 validators, 31 are running v3.2.0, about 89%, clearing the threshold the network treats as sufficiently updated. That figure, not the raw node or all-validator percentages, is what determines whether the upgrade completes.
The amendment lagging behind
Bundled with the software is a separate matter that sits well behind it.
A five-day Twitter exchange between ether.fi CEO Mike Silagadze and KAST CEO Raagulan Pathy escalated from a card-fee comparison into public scrutiny of how KAST treats customer deposits.
KAST, a stablecoin-powered card and neobank that raised $80 million in a Series A round in March at a $600 million valuation, spent the past week defending itself on Crypto Twitter after ether.fi co-founder and CEO Mike Silagadze called the company “Kasthole scammer” in a post that had gathered roughly 400,000 views by the morning of July 7.
The exchange was conducted entirely in public replies and quote-tweets between the two CEOs. Silagadze also urged crypto users to review KAST’s terms of service, which state that depositing stablecoins or crypto on the platform legally transfers ownership of those assets to the company in exchange for a repayable balance.
Outcry over the card’s terms of service adds to the ongoing backlash over KAST’s points system. KAST users received emails on July 2 stating that points accumulated in the company’s rewards program would convert into “tokenized equity” rather than a token. KAST had previously described the points as converting one-to-one to a future token, with a token-generation event targeted for the second or third quarter of 2026.
KAST CEO Responds
KAST CEO Raagulan Pathy addressed the change directly in a post the next morning, on July 3. He wrote that KAST’s top 100 users each hold more than 1 million points, and that “unlike pretty much everyone else, we won’t be keeping the equity to ourselves and airdropping a shitcoin to our users.”
Pathy said KAST would instead give point holders “equivalency in an equity-linked instrument, using the latest share price investors paid,” with details of the transition targeted for the fourth quarter, and said the company would run programs allowing users to cash out as equity is bought back periodically.
Two days later, on the morning of July 5, pseudonymous trader Nikita, who posts as 0xVishnya, published a comparison of five crypto cards used for an identical purchase in Europe. The test found an $8.48 all-in cost after cashback on ether.fi, versus $8.58 on Kraken, $8.63 on Plasma, $8.82 on Wirex and $9.03 on KAST — a gap 0xVishnya described as 6.5% between the cheapest and priciest card, driven by differences in FX spread, fees and cashback.
Silagadze quote-tweeted the test seven minutes later, writing that the ether.fi product is “absurdly better than anything else,” with “no hidden fees, no lies about cashback, no forcing users to stake some shitcoin,” while adding “we suck at marketing tho.” Later that day, Pathy quote-tweeted a chart of ether.fi’s token, ETHFI, posted by another account, captioning it: “‘We’re not very good at marketing’… dumping on retail doesn’t count?” ETHFI trades around $0.43 — down roughly 95% from its 2025 all-time high of $8.53, according to CoinGecko.
The following morning, July 6, Silagadze replied directly to Pathy: “Are you for real? You want to talk shit because our token is down in this market? Your whole business is scamming your customers. You’re a con artist.”
Pathy responded later that day with a GIF of South Park character Eric Cartman and no caption. Silagadze then quote-tweeted that reply with the caption “Kasthole scammer,” a post that had gathered more than 800 likes and roughly 190 reposts by the following morning.
Controversial Deposit Terms
Silagadze posted a screenshot of KAST’s terms and conditions, dated Dec. 1, 2025, that treated a user’s deposit as an unconditional transfer of ownership, with no language in that clause about KAST owing anything back.
“When a user transfers Virtual Assets (such as cryptocurrencies or stablecoins) into KAST, the transfer is treated as a sale of the Virtual Asset to KAST,” the terms and conditions said. “For clarity, once a user sells their Virtual Assets to KAST, the user no longer retains any ownership interest in those Virtual Assets. Ownership of the Virtual Assets transfers to KAST, and the assets are thereafter managed at the KAST corporate treasury level.”
As written, the clause described a one-way transfer: once crypto reached KAST, it became the company’s property, and the section made no mention of a corresponding right for users to reclaim that value.
The Defiant verified via the Wayback Machine that those were, in fact, the terms listed on KAST’s website as recently as June 25th.
Source: Mike Silagadze via X
But as of press time on July 7, the terms have been updated. The company still calls the deposit a “sale,” but the clause now pairs that with an explicit promise to repay users for what they haven’t spent:
“While transferring Virtual Assets (such as cryptocurrencies or stablecoins) into KAST is treated as a sale to KAST, you retain an affirmative right to redeem or withdraw the unspent balance of the resulting payment obligation at any time, subject to our standard withdrawal procedures, compliance and fraud checks, minimum limits, and applicable fees. For the avoidance of doubt, this right exists only with respect to the portion of the balance that remains outstanding and unspent. Once any portion of the balance is spent (including via a card transaction) or otherwise settled, KAST’s payment obligation and your contractual right under this section are extinguished with respect to that portion and do not revive.”
The legal structure is the same as before, KAST still classifies every deposit as a sale of the underlying crypto, and ownership still transfers to the company. What’s new is that KAST now spells out a specific, contractual debt back to the user: it owes them the value of whatever they haven’t spent, and they can demand it at any time. That obligation disappears the moment the balance is spent or otherwise settled, and doesn’t return.
The same section caps KAST’s total liability at $500 and states the company is incorporated in Anjouan, Comoros, with disputes governed by Seychelles law and arbitrated in Singapore.
Pathy responded on July 7 with a thread clarifying that user funds are held in custody with BitGo and Fireblocks, that users retain “a binding payment obligation” and the right to redeem unspent balances at any time, and that KAST’s terms had been updated “to make this very clear.” He also pointed to the company’s $80 million Series A, co-led by QED Investors and Left Lane Capital, which followed a $10 million seed round in December 2024 led by HSG and Peak XV Partners, saying the raise involved months of due diligence from a “Big4” accounting firm.
Unusual Terms
Research account Decentralisedco laid out why KAST’s structure differs from competitors like ether.fi, Avici and Plasma One, which the account said use the same card-issuing stack but settle transactions through user-controlled smart contracts or licensed banking partners rather than taking ownership of deposits.
Because KAST books incoming stablecoins as its own asset, the account argued, the company can earn yield on idle customer balances — estimated at 4-5% annually on T-bill-backed instruments — in addition to standard card interchange fees, a structure the account said isn’t available to rivals that don’t take custody of user funds this way.
Other users pile on
Several other accounts weighed in with separate complaints once the terms-of-service issue began trending. Trader Matt Casto wrote that KAST had encouraged card spending to earn point multipliers, and questioned the timing of the pivot away from a token so soon after the Series A closed. Pseudonymous account MasterChiefNFTs listed a series of grievances, including repeated delays to the token launch — originally slated for the fourth quarter of 2025 — and the discontinuation of a 4% cashback tied to Movement’s MOVE token, which has fallen more than 90% from its late-2024 high following a market-maker dumping scandal.
Investor Simon Dedic wrote that KAST’s structure effectively makes a transfer “a taxable event on top of” losing ownership of assets. 0xArhat said he stopped using KAST after the company asked for proof of payment on a $1,500 transfer, and now uses Plasma and ether.fi cards instead.
EU lawmakers are set to vote again on controversial legislation dubbed “chat control” by its critics, which would allow tech firms to scan messages for child sexual abuse material.
On Tuesday, the European Parliament voted through a rarely used urgent procedure that will bring lawmakers to a vote Thursday on whether to extend the legal framework, which expired in early April.
“Today’s vote violates our own rules of procedure, the European Parliament decided to use an urgent procedure for Chat Control 1.0,” Pirate Party MEP Markéta Gregorová said on Tuesday. “This means that on Thursday, we will once again vote on extending the derogation that allowed online platforms to scan our private communications.”
The upcoming vote could revive the so-called “chat control” rules that are controversial among privacy and cryptography advocates, as tech companies must scan end-to-end encrypted messages.
Since the legal framework expired in April, messaging platforms such as WhatsApp have been allowed to take their own voluntary measures to seek out those sharing abusive material.
Rejecting proposal requires absolute majority
Gregorová said rejecting or amending the proposal will require an absolute majority of 361 votes in Parliament.
The vote Tuesday narrowly passed, with 331 in favor, 304 against and 11 abstaining.
In March, Parliament rejected a temporary extension of the scheme proposed by the European Commission while a new version of the law was under discussion, in a vote of 311 against, 228 for and 92 abstaining.
Euronews reported Tuesday that the latest proposal was revived by the European People’s Party, the largest group in Parliament, which largely voted against the measure in March because of amendments that restricted the scope of the chat scans.
However, European People’s Party leader Manfred Weber has been looking for ways to push through the extension without changes.
Related: Privacy advocates slam reCAPTCHA update they say locks out de-Googled phones
“The European People’s Party is abusing its position as the largest political group to bring back, through a procedural loophole, a proposal that Parliament had already rejected,” Gregorová said. “This is unprecedented.”
EU member states agreed to reinstate an interim “chat control” measure last month, which would allow service providers to detect, report, and remove abusive material until 2028.
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NEAR’s on-chain governance body, House of Stake, passed proposal HSP-027 to eliminate the protocol’s developer gas rebate, a change that will send all network gas fees to be burned rather than partly rebated to smart-contract owners. NEAR co-founder Illia Polosukhin confirmed the outcome Monday,…
NEAR’s on-chain governance body, House of Stake, passed proposal HSP-027 to eliminate the protocol’s developer gas rebate, a change that will send all network gas fees to be burned rather than partly rebated to smart-contract owners. NEAR co-founder Illia Polosukhin confirmed the outcome Monday, calling it a step “to keep NAER Protocol simpler and cleaner going forward.”
Under the current design, 30% of gas fees generated by calls to a smart contract go to that contract’s owner, with the remaining 70% burned. Once implemented, expected around August 2026 with the nearcore v2.14 release, the rebate drops to 0%, so all gas fees are burned, according to a delegate who voted on the proposal. The same account put the final tally at 46 votes representing 4.66 million veNEAR in favor versus two votes representing 1,819 veNEAR against.
NEAR’s developer-relations account had flagged the vote in early July, warning builders “don’t factor this gas bonus into your dApp’s budget anymore.” NEAR’s governance account had described the measure as aimed at reducing “protocol complexity and misaligned incentives for builders.”
Polosukhin, who designed the original rebate to incentivize developers to build reusable components, said the mechanism no longer reflects how most NEAR applications monetize, since projects typically sponsor gas costs and recoup revenue through spreads, subscriptions or ads instead. He also cited an accounting problem: the rebate was hard to distinguish from ordinary user deposits of funds.
Polosukhin framed the vote as a trial run for House of Stake’s authority over NEAR’s core economic parameters, saying it is “a great test” ahead of future proposals and that he was “excited to have explicit governance for economics of $NEAR.” The change makes NEAR’s token issuance more deflationary by removing a carve-out from fee burning, though it does not alter the network’s broader value-capture model.
The yen is trading near its weakest level in four decades, and Japanese companies are moving crypto onto their balance sheets to escape it.
SBI VC Trade on Tuesday said corporate demand for bitcoin and XRP is climbing as the currency’s slide pushes firms to diversify reserves beyond cash, with the exchange’s registered accounts passing 2 million, roughly double its 2025 count.
Hedge funds have turned the most bearish on the yen since 2007, boosting bets on further losses to nearly 138,000 contracts as of June 30, per CFTC data. The dollar buys around 162 yen as of Asian morning hours Wednesday.
The driver is the interest-rate gap between a hawkish U.S. Fed and a Bank of Japan still far behind it, the same gap that makes holding yen cash a losing position and sends firms looking for harder assets.
SBI, the crypto arm of Tokyo-based SBI Holdings, noted demand for its corporate service has grown alongside companies that hand out bitcoin or XRP through shareholder-perk programs.
The move fits a pattern the market has watched all month. A weak yen has fed the carry trade, where investors borrow cheaply in yen to buy higher-returning assets elsewhere, and some of that flow is now reaching crypto through regulated Japanese channels rather than offshore ones.
Bitcoin traded near $62,650 on Tuesday, up 6.1% on the week, per CoinDesk data.
Bitcoin financial services platform Strike has launched a “volatility-proof” Bitcoin-backed loan that eliminates margin calls and forced liquidations amid the depths of a bear market, but only for those who can pay on time and handle a 14% interest rate.
In an announcement on Tuesday, Strike CEO Jack Mallers said the offering came in response to broad customer feedback on Strike’s first Bitcoin loan product, which launched in May 2025 and triggered many liquidations during a timeframe in which Bitcoin (BTC) dropped 54% from peak to trough.
“No margin calls. No price liquidations. No matter how far bitcoin falls, your bitcoin doesn’t move,” Strike CEO Jack Mallers said of the new Bitcoin loan product. The trade-off is an expensive interest rate, a shorter six-month loan term, and an obligation to pay on time to avoid liquidation, Mallers said.
Strike’s Jack Mallers is presenting the new Bitcoin-backed loan product. Source: Jack Mallers
The Bitcoin industry has spent the better part of a decade racing to build financial products that expand Bitcoin’s use case beyond a savings technology. A report in June from crypto lending platform Ledn, however, found that while 88% of surveyed crypto investors said they would consider a crypto-backed loan, only 14% use them.
Ledn said confidence in crypto-lending products and market volatility are among the main reasons for this 6-to-1 “crypto collateral gap” that has slowed adoption.
Volatility has been one of the biggest obstacles behind that push, with Bitcoin dropping 30% or more in 10 of the past 12 years, while also experiencing a 50% or more drawdown four times since 2014, Mallers noted.
Other crypto market participants offering Bitcoin-backed loans are Binance, Coinbase, Nexo and Xapo Bank.
Strike charges double-digit interest
The maximum initial loan-to-value ratio for the volatility-proof loans is 45%, meaning that a customer who puts up $100,000 in Bitcoin as collateral can borrow up to $45,000, while the annual percentage rate (APR) is also 2.95 percentage points higher than Strike’s standard loan product.
“The secret sauce is that we’re taking the extra charge that we’re giving you guys and we’re putting it on extra hedges in the market to protect all of us.”
Strike’s standard Bitcoin loans charge an annual percentage rate between 7.75% and 11.25%, meaning the volatility-proof products could carry interest between 10.7% and 14.2%.
“If you’re OK with a slightly shorter term and a little bit higher of a fee, there is no price move that can liquidate you,” Mallers said.
Over the past year, Bitcoin has fallen 54% from its all-time high of $126,080 in October to $58,190 on June 25.
Bitcoin investor Fred Krueger said the loan product “could eliminate one of Bitcoin’s biggest structural problems: forced selling during market crashes.”
“Instead of volatility causing automatic liquidations, defaults would be driven by borrowers’ inability to service debt rather than by temporary price swings,” he said.
Related: Coinbase rolls out UK crypto-backed loans as FCA shapes rules
“Great product for those who need near-term liquidity and don’t want to risk liquidation,” added Vibes Capital Management executive chairman Rob Topping, though he also acknowledged the 14% APR was expensive.
Customers must pay up or face consequences
If a client misses a payment, they have 10 days to make the payment or contact Strike to explain their financial situation, Mallers said.
Failing to pay after that 10-day period may mean Strike starts liquidating their Bitcoin to cover the overdue amount, Mallers warned.
“If we don’t hear from you for a few weeks, then I may have no choice but to sell off some of the Bitcoin because it seems like you’re doing a hit-and-run.”
“That’s why we call it ‘volatility-proof,’ not ‘liquidation-proof,’” Mallers added.
The Bitcoin loans are offered in most US states and can be taken out in both personal and business names. They can be used for new loans, refinancing or consolidating.
While the minimum loan amount varies from state to state, the minimum loan offered through personal loans is $10,000, while businesses in certain states can access loans as low as $5,000.
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