You built your crypto stack for a reason: long-term upside. But what happens when you need liquidity right now?

A lot of investors assume their only option is to sell. But selling triggers tax, reduces your exposure, and can leave you regretting the exit if the market rebounds. Borrowing gives you another path: unlock cash without giving up your position.

This guide breaks down, in plain language:

• What happens when you sell your crypto
• What happens when you borrow against it
• When each option makes the most sense
• How to borrow safely, transparently, and with minimal risk

Let’s dive in.

What happens when you sell crypto

Across both Canada and the United States, regulators treat crypto as property, not currency. That means selling, swapping, or spending crypto creates a taxable event.

Canada

Under the Canada Revenue Agency (CRA):

• Crypto is taxed like any other capital asset.
• If you’re investing (not running a trading business), 50% of your gain is taxable.
• If your activity looks like a business (frequent trades, organized intent), gains may be taxed as 100% business income.
• Any disposal—selling, swapping into another crypto, or using crypto to buy something—must be recorded with dates, values, and wallet details.

Example

You buy 1 BTC at $140,000 CAD and later sell at $190,000 CAD.

• Gain = $50,000
• Taxable portion = $25,000
• That $25,000 is taxed at your personal marginal rate.

United States

The IRS also treats crypto as property.

• Selling, swapping, or disposing of crypto creates a capital gain or loss.
• Gains are reported on Form 8949 and Schedule D.
• Holding period matters:
  • Short-term (<12 months): taxed as ordinary income
  • Long-term (>12 months): lower capital gains rates

Example

Buy 1 BTC for $100,000 USD → sell at $170,000 USD.

• Gain = $70,000
• If held >12 months → long-term capital gains
• If held <12 months → short-term (higher rate)

Bottom line:‍

Selling gives you liquidity, but it also locks in tax and removes your upside entirely.

What happens when you borrow against your crypto

Instead of selling your BTC or ETH, you can post it as collateral and borrow fiat (or stablecoin) against it. Increasingly, long-term holders use this to stay invested while accessing cash when they need it.

Is borrowing a taxable event?

In most jurisdictions, no.

A loan backed by crypto is not considered a sale, so you generally don’t trigger capital gains when the loan originates.

However:

• If your collateral is liquidated, that may count as a disposal.
• If you repay the loan in appreciated crypto, that may also trigger tax.
• Some jurisdictions may treat things like wrapping (BTC → cbBTC), transfers, or interest differently. Always confirm with a tax professional.

Why borrowing can make sense

• Stay invested: You keep exposure to future upside.
• Defer tax: No realization event at origination.
• Unlock cash: Use funds for real estate, business investment, or market opportunities.
• Optionality: If markets run, you’re still in the game.

Many APX customers borrow for:

• Down payments
• Business expansion
• Taxes or operational liquidity
• Portfolio rebalancing without selling core holdings

‍

Potential risks

• Liquidation risk: If BTC or ETH drops and your LTV rises, your collateral may need a top-up. If liquidation risk is a real concern, check out our primer on crypto-loan liquidation.
• Interest costs: Make sure borrowing costs are lower than the value you expect to preserve by not selling. For a convenient look at what the biggest lenders are charging, check out our platform-by-platform comparison guide.
• Documentation: You’ll need clear records for tax purposes.
• Repayment method: Repaying in crypto may trigger taxable disposal.

Borrow vs. sell: side-by-side comparison

When borrowing makes the most sense

Borrowing is especially compelling when:

• You believe your BTC or ETH will continue to appreciate
• You need liquidity now but don’t want to exit your position
• You’re using funds for high-ROI activities (business, real estate, reinvestment)
• You want a regulated, transparent lender, especially important in jurisdictions like Canada
• You care about secure custody, segregation, and no rehypothecation

How APX Lending reduces risk

• Regulated under Canadian authorities
• Segregated, insured BitGo Trust custody
• No rehypothecation, ever
• Transparent terms and fixed collateral thresholds
• Real-time on-chain proof of reserves
• FINTRAC + FinCEN registration, SOC 2 attestation

If you want the low-risk version of crypto borrowing, this is it. But don't take our word for it.

See what the Canadian Securities Administrators have to say.

When selling might be the right move

Selling makes more sense if:

• You want to exit crypto or reduce exposure
• You expect the market to fall
• Loan interest and fees outweigh your expected upside
• You’d rather avoid margin-call or liquidation mechanics
• You want liquidity immediately and don’t need the tax deferral

There’s nothing wrong with taking profit if you have a thesis behind it.

Final thoughts

If your goal is to unlock cash today without giving up your crypto’s future upside, borrowing against your holdings can be a smart strategy, especially when done through a regulated, transparent lender.

If you’re ready to de-risk or exit positions, selling may be the better choice.

Whatever you choose, custody, compliance, and clarity matter. APX Lending is designed to give Canadian and U.S. investors a safe, regulated way to borrow against their crypto without taking on platform risk.

Ready to see how borrowing fits into your portfolio?

Tax FAQs