Will New Crypto Miner Lending Pool Attract Borrowers?

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

Institutions looking to lend 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 marketplace, the companies said on Tuesday.

Previous Maple pools — which have targeted different risk profiles and shorter maturities — lend at between 8% and 12%, Maple Finance CEO Sid Powell told Blockworks. The higher interest rates reflect the recent credit crunch, long-term borrowing and the overall risk in mining now.

The loans in the pool – with an initial capacity of $300 million – have maturities of 12 to 18 months and will be backed by assets such as mining rigs, power transformers and digital assets.

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

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

Maple has issued nearly $1.8 billion in loans since the launch of 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 financial management and sound 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 enable them to use marginal capital in an attractive way – whether to increase capacity or reduce volatility in revenue through providing additional security PPAs,” Icebreaker Finance CEO Glyn Jones told Blockworks.

But conditions for miners appear to be “quite onerous,” according to Chase White, a senior research and policy analyst for Compass Point Research and Trading.

“I think the type of miner who will 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 of similar schemes, White added.

Argo Blockchain, for example, entered into a $70.6 million equipment-backed financing deal with NYDIG in May that matures in 24 months at 12% interest.

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

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

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

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

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

“The infrastructure-backed debt markets have gotten really, really tight and interest rates have gotten really high, so we’ve definitely seen less activity in that infrastructure debt space,” she added. “From a stock market perspective, we really see [at-the-market offerings] be the vehicle of choice for miners who have that option.”

Hive Blockchain Technologies entered into an IPO deal earlier this month to sell up to $100 million of the company’s stock as it seeks to expand its bitcoin mining capabilities.

Hive’s executive chairman Frank Holmes told Blockworks last week that the firm was doing so to take advantage of potential big buying opportunities in the down market.

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