According to Milk Road, BTC-backed loans allow traders to access cash without selling their Bitcoin holdings. By depositing BTC, traders receive fiat or stablecoins, which can then be used for further trading opportunities. Typically, these loans operate on a 50% loan-to-value (LTV) ratio. For instance, to borrow $10k, a trader must deposit $20k in BTC. However, if Bitcoin's value drops by 30% to $14k, the collateral value could decrease significantly, triggering potential margin calls. This scenario necessitates careful risk management and monitoring of Bitcoin price trends to avoid liquidation.