Eligible U.S. users can now borrow up to $100,000 in USDC against the privacy coin, which has been swinging by double digits in an hour.
Coinbase has added Zcash as eligible collateral for USDC loans, extending its on-chain lending product to one of the market's most erratic assets.
The loans run through the Morpho lending protocol on the Base network. U.S. customers who qualify can take out as much as $100,000 against their ZEC instead of selling it. Depending on how a loan is set up, the maximum loan-to-value ratio ranges from 62.5% to 77%. The product plugs into a lending business that already carried upward of $1.4 billion in outstanding loans on .
A collateral asset in constant motion
The timing puts the decision under a microscope. ZEC has produced repeated liquidation waves this week, with hourly swings as large as 17% and forced liquidations ranging from a few hundred thousand dollars to several million dollars per event.
That volatility is the core risk for a lending product. A 17% decline in collateral value would raise an initial 62.5% loan-to-value ratio to about 75.3%, assuming the debt balance stays unchanged. An initial ratio of 77% would rise to about 92.8%. These calculations illustrate sensitivity to price moves; the protocol’s liquidation threshold, interest accrual and other terms determine when a position can be liquidated. Forced sales in a thin market can add to downward pressure.
Institutional money is cooling
Traditional fund flows are sending a softer signal. Grayscale's Zcash Trust recorded an $8.1 million outflow on after three flat sessions, leaving assets at about $926.8 million. The outflow is less than 1% of the fund, small in isolation, but it came just as Coinbase was expanding ZEC's role.
Why Coinbase is doing it
Collateral listings broaden what customers can do without selling, which keeps assets on the platform and generates lending activity. The loan-to-value limits constrain borrowing, although they do not eliminate collateral volatility or liquidation risk.
What to watch
Liquidation volumes on the ZEC collateral pool once borrowing begins, and whether Coinbase adjusts the loan-to-value thresholds after the first sharp move. A tightening would be the clearest sign the risk is larger than the launch parameters assumed.