Bitcoin holders on Base are now borrowing roughly $1.6 billion in USDC, a stablecoin pegged to the U.S. dollar, against their coins through Morpho, a record for the decentralized lending protocol on Coinbase's Ethereum Layer 2 network. The twist is who is doing the borrowing: much of the activity comes from Coinbase customers who may not realize they are using DeFi at all.

The numbers behind the borrowing boom

As of mid-October 2026, outstanding USDC loans backed by cbBTC on Morpho's primary market stood at approximately $1.6 billion. cbBTC is a wrapped version of Bitcoin, a token that represents the underlying coin so it can function inside onchain applications.

Bitcoin-backed borrowing across Morpho's Base markets is up 55% year-to-date. The flagship cbBTC/US market on Base accounts for the largest single share of that activity, and it is where the record borrowing is concentrated. As of October 19, 2026, it held $3.26 billion in posted collateral against $1.59 billion borrowed, with utilization sitting at 90.2% on the same date.

Borrowing has also become cheaper. Rates fell from about 7.5% last year to near 5%, even as loan volumes climbed.

How Coinbase turned DeFi into a back-end service

The engine behind this growth is Coinbase. The exchange launched variable-rate USDC loans powered by Morpho in January 2025, building the protocol directly into its lending offering.

The setup lets a customer pledge Bitcoin and receive USDC without navigating a DeFi front end, connecting a wallet, or reading a protocol's documentation. Coinbase handles the interface, while Morpho runs the lending logic underneath. Like other DeFi lending protocols, Morpho operates through smart contracts — self-executing code on a blockchain — rather than a centralized intermediary.

By September 2026, Coinbase's variable-rate loans had surpassed $1.4 billion in active borrowing, backed by nearly $3 billion in collateral. The company then added a second option: on September 22, 2026, it introduced fixed-rate loans through Morpho Midnight. A fixed rate locks in the borrowing cost for the term of the loan, while the variable-rate option adjusts with market conditions.

Demand has grown as users convert Bitcoin into cbBTC to use as collateral. Each conversion feeds the market, pulling more Bitcoin into onchain credit rails.

Base becomes Morpho's main stage

The surge has made Base a principal venue for Morpho's lending business. Morpho deposits on Base topped $5 billion earlier in 2026, with Coinbase-originated borrowing making up a significant share of the total. Layer 2 networks like Base run atop Ethereum and are designed to process transactions at lower cost than the main chain.

What this means for borrowers, lenders, and the protocol

For Bitcoin holders, the appeal is straightforward: they can access dollar liquidity without selling their coins, and the cost of doing so has dropped to near 5% from about 7.5%.

For lenders supplying USDC, a utilization rate near 90% signals that their capital is being put to work. High utilization generally means suppliers are earning on most of what they deposit rather than having funds sit idle. The flip side is that very high utilization can tighten available liquidity: when most of a pool is lent out, there is less room for lenders who want to withdraw at once.

For Morpho, the growth is tied closely to Coinbase's front end, which means the protocol's fortunes on Base are linked to how Coinbase continues to build on it.

Key figures to watch include how the fixed-rate Morpho Midnight product performs relative to the variable-rate option, and whether utilization holds near 90% while borrow rates stay near 5% — a combination that would suggest lender supply is keeping pace with Coinbase-driven demand.