Babel Finance is letting bitcoin mining firms put up their machines as loan collateral so the lender can offer them better terms.
The loan-to-value ratio (LTV) for these loans is 30%, in part because Babel keeps the freshly mined crypto until the borrower pays back the loan. The LTV is significantly cheaper than the 160% Babel normally charges, which means borrowers would need to put up $1.6 million worth of bitcoin in order to borrow $1 million in U.S. dollars.
In a bull market miners are increasingly uneasy parting ways with mined cryptocurrency. These loans allow the miners to cover expenses like paying electricity bills or purchasing new equipment while giving up less BTC or ETH.
“For miners, the biggest asset they have is their machines,” said Lei Tong, Babel’s managing director of financial services. “After the March 12 price drop, they really wanted to keep as many coins as possible. Putting their machines up as a mortgage is a much better way for them to get loans versus using bitcoin.”
The service launched in June 2020 and has since accumulated $22 million worth of machine-backed loans.
To offer the service, Babel has teamed with the world’s largest ETH mining pool, Spark Pool; one of the largest BTC mining pools, F2Pool; and bitcoin mining farm operators Hashage and Heng Jia Group.
Machine-backed loans now make up almost 5% of the company’s $450 million