With a bitcoin-backed loan, a bitcoin holder can pay for goods or services with cash – for example, to buy a house or pay medical bills – without needing to sell their bitcoin. Not only does the user keep their bitcoin stash (provided they pay out the loan when it matures) but they also don’t have to worry about tax implications from a BTC sale.
Bitcoin-backed loans have also become popular among bitcoin mining companies, which earn revenue in BTC but need to pay for their operating costs in U.S. dollars or other currencies. Historically, miners would sell part of their produced bitcoin to cover expenses, but over the past couple of years big players in the industry have grown fond of taking out cash loans with their bitcoin holdings.