With crypto asset prices down and bitcoin falling more than 50% this year, capital from usual sources has completely dried up. Given the capital-intensive business model of the crypto mining business, miners are looking for alternatives, and private credit seems to be offering new and creative ways to help firms that are under stress, said Powell.There are strings attached, of course.
“The sector needs liquidity, so we are figuring out creative ways to assist,” Powell said in an interview with CoinDesk. “Typically, the firms you would want to underwrite are those with low levels of debt on their balance sheet, and who have things like power purchase agreements in place, so effectively a longer line of sight on what their electricity will cost.
Previously, a common loan structure for mining firms was either bitcoin-backed loans or non-recourse loans against ASICs – the specialist mining equipment used to earn bitcoin. Under these terms, when a loan is not performing, the borrower can hand back the ASICs to the financier and walk away from the loan.
“[That’s what we don't want to happen [with Maple's lending pool]. Mining equipment is subject to wear and tear and the value of ASIC can fluctuate even more than bitcoin. To avoid this, Icebreaker's loans will be full-recourse,” Powell said. Maple isn’t the only company looking to capitalize on opportunities for lending to struggling crypto miners. Most recently, Binance Pool