Coinbase has introduced fixed-rate Bitcoin-backed USDC loans through Morpho Midnight, a fixed-rate lending protocol. These loans differ from Coinbase's variable-rate offerings by setting both the interest rate and repayment deadline at loan confirmation.
The loans carry a distinct liquidation trigger tied to the maturity date. If a borrower fails to repay the full balance by the deadline, the position becomes eligible for liquidation even if the loan-to-value ratio remains healthy. This creates a liquidation risk independent of Bitcoin price movements.
How Liquidation Works
Coinbase states that fixed-rate loans must be fully repaid by maturity to avoid liquidation eligibility. Under Morpho's rules, a healthy position is not liquidatable at the exact maturity time, but once the deadline passes with outstanding debt, liquidators can repay the debt and seize collateral regardless of the position's health status.
Borrowers face two potential liquidation triggers: a health-based threshold if collateral value falls or debt rises sufficiently, and a maturity-based trigger if the loan remains unpaid after the deadline. Health-based liquidation can occur before maturity if collateral conditions deteriorate.
Borrower Notifications and Terms
Coinbase sends maturity reminders at seven days, three days, and 24 hours before a loan comes due. Borrowers must repay the full balance by the deadline regardless of reminder status or healthy collateral ratios.
Early repayment does not reduce interest owed. Borrowers cannot convert existing loans between fixed and variable rates, making the maturity date and total repayment amount critical terms to review before loan confirmation.
The service is available to verified US customers outside New York and has limited access in the UK. Bitcoin serves as collateral for the fixed-rate offering launched through this service.
