The growth argument is based on a simple dynamic: As bitcoin ownership expands and prices rise, holders increasingly want to borrow against appreciated collateral for tax efficiency, working capital or lifestyle needs, while lenders feel comfortable underwriting oversecured loans secured by a highly liquid asset.
The bitcoin lending industry was reshaped by the failures of Celsius, BlockFi, and Genesis during the 2022-2023 crypto credit crisis. While each company had different business models, they shared common vulnerabilities: maturity mismatches, excessive leverage, concentrated counterparty exposure, and remortgaging client assets.
Their collapses underscored the importance of conservative underwriting, transparent risk management, and fully collateralized lending principles that have become the foundation of the next generation of BTC-backed lenders, according to the SVB report.
Landmark transactions, including Ledn’s $188 million asset-backed security, the first bitcoin-collateralized deal to receive an investment grade rating from a nationally recognized statistical rating organization, underline the growing confidence in BTC-backed credit structures, according to SVB.
While rates on bitcoin-backed loans still generally range between 7.5% and 16% annual percentage rate (APR), well above comparable traditional financing, SVB expects greater participation from banks and private credit funds to narrow spreads over time. Early signs are already emerging, including Strike’s recently announced 7.5% rate for term loans over $5 million, backed by a $2.1 billion Tether line of credit.
