Coinbase Crypto-Backed Loans are one of the first DeFi consumer integrations reaching real scale, letting users borrow USDC using cbBTC as collateral but the current loan conditions are becoming hard to justify compared to going onchain directly. The cost for the borrower has two parts: - the onchain borrow rate on the Morpho cbBTC/USDC market according to market conditions, and - the Coinbase origination fee (2% on the first $ 250k, then 1%). The current Morpho rate is 5.78% avg over the last 6h, making the total loan cost of 7.78% annualised. On a $250k loan held for 12 months that's ~$19.4k total in borrow interest. The same loan on Aave V3 costs ~$8.7k at 3.49% (USDT) or $9.8k at 3.95% (USDC). On Aave V4, USDG is available at 1.71%, making a equivalent loan cost of $4k total. That's 2x to 4x cheaper between Coinbase product and using Aave directly. Coinbase uses a single isolated Morpho market (cbBTC/USDC). In an isolated model, supply and demand for that specific collateral-borrow pair have to balance within the market itself. If there isn't enough USDC supply relative to borrow demand, rates climb, with no broader liquidity pool to absorb the imbalance. A pooled or hybrid model allows USDC supplied across other collateral types to serve borrowers, which keeps rates structurally lower. Also, the one-time fee is a strange structural choice. A user borrowing for a few months to cover expenses while holding BTC ends up paying a disproportionately large cost for their duration. At 3 months, the origination fee alone adds 8 percentage points to the annualised rate. Even if current users borrowing against Bitcoin on a Coinbase app are still not comparing rates on Aave, that window narrows over time as users become more comfortable with onchain tools, and as interfaces like wallets and aggregators surface rate comparisons, making the cost gap harder to defend.