Hey Reader,

Better Mortgage and Coinbase just made their token-backed mortgage program broadly available.

The headline is obviously going to be:

“Use Bitcoin to buy a house.”

But as a note investor, that is not the part I find most interesting.

I’m looking at the debt structure.

Here’s what they built.

The borrower gets a traditional conforming first mortgage.

Then there is a second loan used to fund the down payment.

That second loan is secured by the borrower’s pledged Bitcoin and a second lien against the property.

That immediately gets my attention because this is the same question I’m constantly asking when I evaluate debt:

If something goes wrong, what is actually protecting the capital?

There are a few things I like about this structure.

First, the borrower does not have to liquidate an asset they want to continue holding just to access liquidity.

Second, Better is not lending dollar-for-dollar against Bitcoin.

At launch, Bitcoin receives a 40% advance rate.

So $250,000 of Bitcoin supports roughly $100,000 toward the down payment.

That haircut creates a meaningful cushion against volatility.

Third, market movement alone does not trigger a margin call.

According to Better, Bitcoin could fall significantly, and the borrower would not automatically be required to add more collateral. Liquidation is tied to payment delinquency instead.

From a lender’s perspective, I understand the logic.

• Use multiple forms of collateral.
• Lend conservatively against the volatile one.
• Create a clear repayment structure.

But there are risks I would be watching closely too.

The biggest one is combined leverage.

The borrower still has the first mortgage AND now has a second loan funding the down payment.

So while the borrower preserved their Bitcoin, they also financed money that traditionally would have come from their own cash.

That changes the borrower’s overall debt burden.

Then there’s collateral volatility.

A 40% advance rate gives the lender room, but Bitcoin can move dramatically.

And while Better has access to the pledged Bitcoin, the real estate lien securing the down-payment loan sits behind the first mortgage.

As a debt investor, lien position always matters.

I would also want to understand the custody risk, liquidation process, recovery timeline, legal costs, and what happens when several problems occur at the same time.

Because having collateral and being able to efficiently recover your capital from that collateral are not the same thing.

That’s an important distinction.

And that is ultimately why I find this program so interesting.

I talked months ago about the possibility of using digital assets as collateral instead of requiring people to sell them.

Now we have 2 major financial players actually putting infrastructure around that idea.

I don’t think this is simply a crypto story.

I think it’s evidence that the definition of acceptable collateral is expanding.

Real estate.

Stocks.

Digital assets.

Tokenized securities.

Potentially assets we have not even started lending against at scale yet.

But regardless of what the collateral is, my rule as a lender stays the same:

Before I ask how much I can make, I want to know how I get my money back.

And with any new lending structure, that’s the part I’ll always study first.

What do you think?

Would you be comfortable lending against a structure backed by both Bitcoin and real estate?

Hit reply. I’m curious what your thoughts are.

Sierra

Educational content only. Personal investment examples are shared for illustration and do not constitute investment, tax, legal, or financial advice, or an offer to sell securities.