Arch Lending: Building a Private Bank for Bitcoiners

Dhruv Patel didn't set out to build a lending company during the worst year in the history of digital assets. In February 2022, just as Terra, Celsius, BlockFi, and eventually FTX were about to collapse in sequence, he and co-founder Himanshu Sahay launched Arch Lending. The timing was, as Patel puts it, "interesting."

"Every other month it seems like there was some big bankruptcy within the space," Patel recalls. "That first year and a half to two years was very challenging, not because of any other aspect than the fact that customer trust had eroded in the space."

The challenge was compounded by a simple problem: Arch has never rehypothecated customer assets and they never will, but that distinction meant little when Bitcoiners were watching their funds vanish across multiple platforms. "Many Bitcoiners lost funds in a variety of those platforms. And so they were just wary or waiting until they would borrow again."

Four years later, the waiting appears to be over. Arch has raised hundreds of millions in lending capital, secured backing from Galaxy, Morgan Creek Digital, and Castle Island Ventures, and brought on former Grayscale CEO Michael Sonnenshein as an advisor.

Patel spent his early career at Bridgewater Associates and later at Brex, where he helped launch lending products and raised over $100 million in debt capital. The experience gave him a front-row seat to how institutional lending works, and why Bitcoin improves the equation.

"It trades 24/7. It's extremely liquid. You can sell billions of dollars of it without really impacting the price," Patel explains. "You can be in a remote location on a Sunday at 1:00 AM and the sale will go through. There's no question about what the price is, the price is reflective in real time and everyone knows the value of that collateral."

Compare that to a mortgage. A traditional home loan requires title searches, appraisals, income verification, and weeks of processing. With Bitcoin, Patel says, "If you're transferring over the bitcoin, it's pretty clear that you have ownership of that collateral. We know what that collateral is worth at every given second."

The result? most Arch clients have funds the same day, sometimes within an hour.

When pitching institutional capital providers, Patel frames bitcoin lending as something they already understand. "It's very similar to borrowing against your stocks. That business has existed for a long time, it's over-collateralized, if the value decreases there's margin calls, liquidations, all the same mechanics."

The pitch has a kicker: "Stocks don't trade over the weekends like bitcoin does. So it's actually even more protected from that perspective."

The ETF approvals in 2024 helped shift perception further. "It was like a one-time step change with respect to perception because institutions were now coming in, different holders and different ways to participate. I think it changed the narrative for bitcoin as collateral."

The thesis is working. Interest rates have dropped from around 16% APR when Arch launched to as low as 8.49% at competitive loan sizes. "That's just a testament to institutional capital coming in, more and more players like banks looking at this space."

Patel is quick to point out that borrowing against appreciating assets isn't a crypto innovation, it's what wealthy families have done for generations.

The math is straightforward: if an asset appreciates faster than the interest rate on the loan, and the loan proceeds aren't taxable while a sale would trigger capital gains. So, borrowing wins.

"We have many people who have borrowed when a bitcoin was $20k, $30k, $40K all the way up till now. They've been able to see it in practice, I took out a loan at $30K, my bitcoin has tripled since, and if I sold it I would have had to pay this tax, and lost out on this appreciation."

The difference now is accessibility. "This is a tool that we're bringing, these private banking, financially sophisticated products, to Bitcoiners. Our mission is to bring these services to everyone."

For those considering their first bitcoin-backed loan, Patel emphasizes risk management over maximizing leverage.

His recommendation? keep reserves. "If you have one bitcoin, maybe you borrow against 0.75 and you keep 0.25 aside just to handle any margin calls." Alternatively, start conservative. "You don't need to take out a 60% loan-to-value. You can start with 30% and that will automatically ensure you have a good buffer."

The recent choppiness in bitcoin's price, down from the all time high of around $126,000, has made this advice particularly relevant. "For folks that had extra, there was a very wise decision just to be able to meet the margin calls that eventually come up from that sort of price action."

Arch is expanding beyond lending. Within the next few months, the company plans to launch trading capabilities, allowing users to buy and sell bitcoin "at some of the most competitive rates out there" through the same platform that handles their loans and custody.

The longer-term vision is comprehensive: a private bank for bitcoin holders that handles lending, income generation, custody, and tax planning under one roof. Products like TaxShield, which uses bonus depreciation on mining equipment to reduce tax liability, and the Bitcoin annuity product launched through a partnership with Mark Moss, point toward that future.

"We're a US-based company, very approachable," Patel says. "You can book a call on our website with a live member of the team that will show up and answer any questions you have."

As for bitcoin's price trajectory, Patel was smart enough to avoid short-term predictions but offers a longer view. "We are due for some good appreciation just given everything that's going on in the macro. You see gold and others really having their moment as a hedge, as a hard asset. And I think Bitcoin is the same if not superior."

If he's right, the case for borrowing against bitcoin only strengthens. Bitcoin-backed lending isn't new, but access to it is. For years, borrowing against appreciating assets was a private banking service reserved for the ultra wealthy.

Arch is betting that Bitcoiners, from the seven-figure holder to the newcomer stacking sats, deserve the same tools. The tradeoffs are real, and so is the opportunity.