Decentralized finance (DeFi) firm Maple Finance is starting a lending pool with $300 million capacity for mid-size bitcoin (BTC) miners across North America and Australia as crypto winter continues to weigh on the mining industry.
Raising capital has become difficult for bitcoin miners this year as the price of bitcoin has slumped and energy prices have skyrocketed. As traditional sources of capital have dried up, new financiers, like Maple, are looking to fill the void. In July, Antalpha, a partner of Bitmain, the largest mining rig manufacturer, announced novel debt instruments for bitcoin miners. Meanwhile, debt restructurings and acquisitions have also started among miners who are trying to survive the bear market.
"Recent market headwinds have caused lenders to pull back, while traditional financing vehicles have been slower to engage this sector," said Sidney Powell, CEO and co-founder of Maple, in a press release on Tuesday. "Miners play an essential role in growing the crypto ecosystem and local economies, and we are proud to extend a new financing vehicle to direct capital where it is needed the most," he added.
Sophisticated investors find the case for investing in bitcoin miners right now "quite compelling," as borrowers still need capital and are "willing to agree to different terms than they would have agreed nine months ago, because they don't have many choices," Glyn Jones, CEO and Founder of Icebreaker Finance, told CoinDesk.
The loans will have a 12- to 18-month tenor and will have interest rates around 15%-20%, which is on the high end for the mining industry but not unheard of. The pool will be managed by Australian-based Icebreaker Finance and will aim to deliver low-teens "risk-adjusted returns" to accredited investors and capital allocators, according to the press release. The pool is aimed at lending to blue chip private and public firms across the U.S. with "effective treasury management and prudent power strategies," the press release said.
Other than digital assets and equipment, which are often used as collateral, the pool will also accept other physical assets such power transformers to secure the loans, Jones said. This "diverse security package" means that not all collateral will be adversely affected if the price of bitcoin drops significantly, Jones said.
The loans will be transparent through the Maple Finance platform, and publicly traded companies that accept funds will also be disclosing loan terms as part of their obligations to investors. Privately held miners that decide to borrow from the Icebreaker pool will be agreeing to "greater transparency than they may have had before," Jones said, adding that he hopes that this transparency can be "transformational" and bring more capital into the sector.
This is the first fully collateralized loan product for a specific industry sector as Maple's bread and butter are uncollateralized loans to market makers and other crypto firms, said a Maple spokesperson.
Maple holds 50% of the DeFi lending market, measured by total loans outstanding across institutional DeFi lending platforms. Since the launch of the first pool in May 2021 the liquidity pools on Maple platform have issued close to $1.8 billion in loans, according to the statement. Maple plans to open more lending pools for the growing mining sector and expects to expand its lending services to financial technology companies.
UPDATE (Sept. 20, 17:52 p.m. UTC): Adds comments from Glyn Jones.
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