Will New Lending Pool for Crypto Miners Attract Borrowers?

Bit­coin min­ers on the hunt for cap­i­tal have a new option — but whether the terms will be attrac­tive to bor­row­ers remains to be seen.

Insti­tu­tions look­ing to loan to bit­coin min­ers can now earn between 15% and 20% annu­al­ly via a lend­ing pool launched by Ice­break­er Finance through Maple Finance’s DeFi lend­ing mar­ket, the com­pa­nies said Tuesday. 

Pre­vi­ous Maple pools — which have tar­get­ed dif­fer­ent risk pro­files and short­er terms — lend at rates between 8% and 12%, Maple Finance CEO Sid Pow­ell told Block­works. The high­er rates reflect the recent cred­it con­trac­tion, longer-tenured loans and the over­all risk in min­ing now.

The loans in the pool — with an ini­tial capac­i­ty of $300 mil­lion — car­ry a term of 12 to 18 months and will be col­lat­er­al­ized by assets such as min­ing rigs, pow­er trans­form­ers and dig­i­tal assets. 

The set­up tar­gets insti­tu­tion­al cred­it investors and cap­i­tal allo­ca­tors as lenders, includ­ing high net-worth indi­vid­u­als, dig­i­tal asset funds and tra­di­tion­al cred­it funds.

“We are find­ing these types of investors are drawn to the strong risk-adjust­ed returns in what is still seen as a more eso­teric invest­ment,” Pow­ell said.

Maple has issued near­ly close to $1.8 bil­lion of loans since launch­ing its first pool in May 2021. Cryp­to invest­ment firm Maven 11 launched a $40 mil­lion insti­tu­tion­al lend­ing pool via Maple last month.

A good option for miners?

Intend­ed bor­row­ers are mid-sized bit­coin min­ing and dig­i­tal asset infra­struc­ture com­pa­nies in North Amer­i­ca, Cana­da and Aus­tralia that have “effec­tive trea­sury man­age­ment and pru­dent pow­er strate­gies,” Maple said in a statement.

“We expect this to be attrac­tive to pub­lic and pri­vate blue chip bor­row­ers where their out­stand­ing oper­a­tional effi­cien­cy and low lev­els of lever­age enables them to deploy mar­gin­al cap­i­tal in an attrac­tive man­ner — whether that be in adding capac­i­ty or in reduc­ing volatil­i­ty of income through col­lat­er­al­iz­ing addi­tion­al pow­er pur­chase agree­ments,” Ice­break­er Finance CEO Glyn Jones told Blockworks. 

But the terms for min­ers seem to be “pret­ty oner­ous,” accord­ing to Chase White, a senior research and pol­i­cy ana­lyst for Com­pass Point Research and Trading. 

“I think the type of min­er that would take this offer is more like­ly to be a min­er who needs cap­i­tal to keep the ship afloat at just about any cost, which is not what the pool seems to be look­ing for,” White told Blockworks.

Inter­est rates rang­ing from 15% to 20%, with month­ly prin­ci­pal pay­ments, are on the high­er end when it comes to sim­i­lar arrange­ments, White added. 

Argo Blockchain, for exam­ple, inked a $70.6 mil­lion equip­ment-backed financ­ing agree­ment with NYDIG in May that matures in 24 months on a 12% inter­est rate. 

“If a min­er is already scaled and has a large amount of [bit­coin] on its bal­ance sheet such that it’s only using debt to fund future growth and has enough cur­rent income to pay month­ly prin­ci­pal and inter­est pay­ments, I think it would be able to get a low­er inter­est rate and longer pay­back peri­od,” White said.

But Matthew Sigel, head of dig­i­tal assets research at VanEck, said access to cap­i­tal for min­ers has become lim­it­ed amid the mar­ket downturn. 

“The pub­lic equi­ty cap­i­tal mar­kets are large­ly closed to bit­coin min­ers, so we’d expect decen­tral­ized pools like Maple’s to get some trac­tion from min­ers look­ing to make it through to the next halv­ing, despite the high inter­est rates,” Sigel said. 

Some min­ers in need of cash have resort­ed to sell­ing their hold­ings of late, or using its bit­coin as col­lat­er­al for loans.

Hut 8 Min­ing CEO Jaime Lev­er­ton said dur­ing a pan­el at Block­works’ Dig­i­tal Asset Sum­mit she expects more com­pa­nies to use BTC stacks as col­lat­er­al going forward. 

“The infra­struc­ture-backed debt mar­kets have got­ten real­ly, real­ly tight and rates have got­ten very high, so we’ve seen less activ­i­ty in that infra­struc­ture debt space for sure,” she added. “From an equi­ty mar­kets per­spec­tive, we real­ly see [at-the-mar­ket offer­ings] being the vehi­cle of choice for min­ers that have that opportunity.”

Hive Blockchain Tech­nolo­gies entered into an at-the-mar­ket equi­ty offer­ing agree­ment ear­li­er this month to sell up to $100 mil­lion of com­pa­ny shares as it seeks to grow its bit­coin min­ing capabilities. 

Hive Exec­u­tive Chair Frank Holmes told Block­works last week that the firm did so to cap­i­tal­ize on poten­tial great buy­ing oppor­tu­ni­ties in the down market.

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