Binance Launches $500 Million Lending Pool for Bitcoin Miners
by James · October 14, 2022
Binancethe world’s largest cryptocurrency exchange, has unveiled a $500 million lending pool for Bitcoin miners as a combination of energy costs, low Bitcoin prices and higher-than-ever mining difficulties weigh on the sector.
The company said the Binance Pool project was designed to provide “secure debt financing services to both public and private blue-chip Bitcoin (BTC) mining and digital asset infrastructure companies globally.”
Borrowers will have access to loans with an 18- to 24-month term, with interest rates ranging from 5% to 10%.
They will also have to offer security in the form of mining hardware or cryptocurrencies that must be deemed “satisfactory to Binance.”
Mining industry under pressure
Binance’s move makes sense in the current industry context, as it has become more and more difficult for miners to make money.
Just last month, Compute North filed for bankruptcyIris Energy sold $100 million in equity to generate cash, Compass Mining shut down operations in Georgiaand one of the largest Bitcoin mining pools, Poolin, frozen outlet,
The mining difficulty has also just hit one all-time highmeaning miners need even more resources to continue making money.
The network’s difficulty rose 14% to a new all-time high of 35.6 trillion. This means that miners must go through as many hashes, or guesses, to produce the cryptographic string that gives it the right to add the next block of transactions to the chain.
High energy costs have also made Bitcoin’s mining operations significantly more expensive to operate, especially as the world’s largest cryptocurrency still relies on an energy-intensive proof of work (PoW) validation model.
Ethereum’s recent exchange to proof-of-stake (PoS), which dramatically reduced the network’s energy use, looks very savvy in today’s energy landscape.
Miners have been particularly hard hit by the bear market, with mining revenues down almost 60% since the start of the year, following Blockchain.com. And with Bitcoin at a low of $19,615.13, miners are increasingly turning to lines of credit to stay afloat and remain profitable, hoping to make it through this crypto winter.
Indeed, Binance is not the only company that is getting into lending to miners.
At the beginning of the month, Maple Finance announced a $300 million loan facility for troubled Bitcoin miners, but with up to 20% interest.
Sidney Powell, Maple Finance’s co-founder and CEO, told Decrypt on Messari Mainnet 2022 that miners have little choice when it comes to choosing a lender, as traditional banks have often been leery of doing business with crypto firms.
