As crypto winter continues to weigh on the mining sector, decentralized finance (DeFi) business Maple Finance is launching a loan pool with a $300 million capacity for mid-size bitcoin (BTC) miners in North America and Australia.
Raising funding for bitcoin miners has gotten challenging this year as the price of bitcoin has fallen and energy prices have increased. As traditional sources of funding dry up, new financiers such as Maple are stepping in to fill the hole. Antalpha, a partner of Bitmain, the world’s largest mining rig manufacturer, launched new debt instruments for bitcoin miners in July. Meanwhile, debt restructurings and mergers have begun among miners attempting to weather the weak 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.
The loans will have a duration of 12 to 18 months with interest rates of 15%-20%, which is on the high side for the mining industry but not unheard of. According to the press release, the pool will be managed by Icebreaker Finance and will aim to provide “risk-adjusted returns” in the low teens to authorized investors and capital allocators. According to the news release, the pool is focused on lending to blue chip private and public enterprises across the United States who have “strong treasury management and smart power strategy.”
The case for investing in bitcoin miners right now is “quite compelling,” according to Glyn Jones, CEO and Founder of Icebreaker Finance, because 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.”
Other than digital assets and equipment, which are frequently used as collateral, the pool will take physical assets such as power transformers to secure loans, according to Jones. 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 disclosed via the Maple Finance platform, and publicly quoted companies who take funding will also disclose loan terms as part of their investor requirements. Privately held miners that borrow from the Icebreaker pool will agree to “more transparency than they may have had before,” according to Jones, who expects that this transparency will be “transformational” and attract more money to the sector.
According to a Maple representative, this is the first fully collateralized loan product for a specific industry area, as Maple’s bread and butter is uncollateralized loans to market makers and other crypto firms.
In terms of total loans outstanding across institutional DeFi lending platforms, Maple controls 50% of the DeFi lending market. According to the statement, the liquidity pools on the Maple platform have issued about $1.8 billion in loans since the introduction of the first pool in May 2021. Maple intends to develop additional loan pools for the expanding mining sector and to broaden its lending services to financial technology firms.