As Bitcoin matures as an asset class, new financial tools are giving miners more flexibility in managing liquidity—without needing to sell their BTC produced. One such tool is Bitcoin backed lending, a growing option for both retail and bigger miners. For miners, this type of financing has become especially attractive, offering a way to fund operations and growth while holding onto their BTC. Let delve into how it works, what the general terms look like, and why it’s gaining traction in the mining sector.
Hard Lessons From Last Market Cycle
From Speculative Borrowing to Capital-Efficient Treasury Management
A Tool for Fleet Management
Generating Yield Alongside Price Appreciation
How BTC-Backed Borrowing Works
Typical Loan Terms
Four Reasons Why Bitcoin Miners Use BTC-Backed Loans
Payback Using Hashrate
Premium Members Only:
Calculating Real $/TH with Financing
Impact on Payback Period
Boost your ASIC mining with NiceHash Firmware, powered by MARA!
Get the highest efficiency and lowest fees – just 1.4% when mining on NiceHash. Unlock elite mining technology for your Bitcoin (S19, S21 series) and Kaspa (KS5, KS3) Antminers. Supports air, hydro, and immersion cooling.
Hard Lessons From Last Market Cycle
Bitcoin collateralized loans are not new. During the 2021 bull market, crypto lenders like Celsius and BlockFi offered attractive BTC-backed loans, allowing users to borrow fiat or stable coins while retaining Bitcoin exposure. These loans typically featured low interest rates and flexible terms, backed by rising digital asset prices. However, when markets turned in 2022, both firms froze withdrawals and ultimately filed for bankruptcy, leaving many customers unable to access their funds. Their downfall highlighted the risks of rehypothecation, overleveraging, and non-transparent risk management practices.
At the same time, Bitcoin mining lenders like NYDIG extended hundreds of millions in loans to miners using ASICs as collateral. Many miners borrowed at the top of the market, financing $10,000 machines under the assumption of continued high revenue. But when hashprice collapsed and ASIC prices fell by over 80%, borrowers defaulted and lenders were forced to repossess rapidly depreciating hardware. NYDIG reportedly seized tens of thousands of machines, but the resale value couldn’t cover outstanding debt. These events exposed the fragility of using ASICs as loan collateral in a volatile market. As a result, both crypto and mining finance have shifted toward more conservative, risk-managed lending practices.
From Speculative Borrowing to Capital-Efficient Treasury Management
As time has passed, trust in BTC-backed lending products is gradually returning. A mix of established firms and new entrants are reintroducing collateralized loan offerings, often with more transparency and risk controls than before.
A Tool for Fleet Management
For Bitcoin miners, financing infrastructure like land and facility buildouts, is more accessible through traditional avenues such as bank loans. However, securing financing specifically for ASICs remains a challenge due to their volatile resale value and rapid obsolescence.
Prolonged periods of compressed mining margins have left many miners with limited cash reserves. Upgrading to newer, more efficient hardware is essential to remain competitive, but difficult to fund outright. Rather than liquidating the Bitcoin they’ve mined—often seen as a last resort—miners are increasingly turning to BTC-backed lending to unlock liquidity. These loans allow them to expand or refresh their fleets without sacrificing long-term upside by selling their BTC. The new wave of BTC-backed lending is becoming a strategic tool for fleet optimization.
Generating Yield Alongside Price Appreciation
To generate cash flow, miners aren’t just borrowing against their collateralized BTC—they’re also putting their Bitcoin to work. One common strategy is lending out Bitcoin to earn yield.
Earlier this year MARA disclosed that they’ve lent out 7,377 BTC—about 16% of their total holdings. The move appears to be part of a broader effort to generate income and offset rising operational costs. Robert Samuels, MARA’s Director of Investor Relations, described these as “short-term arrangements with well-established third parties.” Still, he declined to name them—which may leave some investors feeling uneasy.
How BTC-Backed Borrowing Works
At its core, borrowing with BTC as collateral is straightforward:
Set your loan terms: Choose your loan amount, interest rate, and loan period.
Pledge BTC as Collateral: Borrowers deposit Bitcoin with a lending platform or financial institution. The BTC is locked in escrow or multisig custody.
Receive a Loan in Fiat or Stablecoins: The lender issues a loan in USD, EUR, or stablecoins like USDC or USDT. The size of the loan is based on the Loan-to-Value (LTV) ratio.
Repay the Loan with Interest: Borrowers make regular interest payments, and at the end of the term—or earlier—repay the principal to reclaim their BTC.
Typical Loan Terms
When taking out a BTC-backed loan, borrowers typically choose their loan amount, interest rate, and loan period based on a few key parameters.
Loan-to-Value (LTV)
LTV ratios generally range from 25% to 70%, with lower LTVs offering more security but less upfront cash, while higher LTVs increase the risk of liquidation. LTV = Loan Amount / Value of Collateral.
Interest Rates
Interest rates usually fall between 6% and 12% APR (Annual Percentage Rate). This is the yearly cost of borrowing money, expressed as a percentage of the loan amount. It includes not just the interest rate but also any additional fees or costs associated with the loan (if applicable). The APR will depend on the loan’s LTV, duration, prevailing market conditions, and the lender’s risk profile.
Loan Duration
Loan durations in general span from 3 to 24 months, with some providers offering flexible repayment schedules and others sticking to fixed terms.
Liquidation Threshold
Most lender or the lending platform enforce a liquidation threshold around 80%–95% LTV —if the BTC price drops and the collateral’s value falls too far, the lender may sell the BTC to cover the loan and manage risk. A 95% LTV means that the Bitcoin price to just above 1.05x the loan amount, 80% LTV means your BTC is worth 1.25 times the loan amount.
Margin Calls
Additionally, margin calls are typically triggered around 70% LTV, prompting borrowers to either add more collateral or partially repay the loan to rebalance risk.
4 Reasons Why Bitcoin Miners Use BTC-Backed Loans
Bitcoin miners are natural holders of BTC—they earn it directly as revenue. But operating a mining facility requires ongoing expenses: power bills, maintenance, equipment upgrades, and scaling infrastructure. Selling BTC to cover these costs isn’t always ideal—especially during bear markets, when production costs approach or even exceed the spot price of Bitcoin. Here are four reasons why BTC-backed loans are appealing to miners.
Access Liquidity Without Selling
Miners can access cash for operational or capital expenditures while holding onto their BTC for long-term upside. This is especially valuable when BTC prices are low.
Tax Efficiency
In many jurisdictions, borrowing is not a taxable event—unlike selling BTC, which can trigger capital gains.
Smooth Cash Flow
Mining revenue fluctuates with hashprice. Borrowing against BTC helps smooth out cash flow for consistent budgeting.
HODL Strategy Support
For miners who believe in Bitcoin’s long-term potential, BTC-backed loans align with a “stack-and-hold” mindset.
Payback Using Hashrate
M2 in partnership with NiceHash offer USDT-denominated loans to Bitcoin miners, using BTC as collateral. The arrangement includes a repayment option that uses a portion of the borrower’s hashrate. Through NiceHash’s platform miners can manage loan obligations and mining rewards within a single dashboard, with the option to automate repayments through mining income.
The following content is exclusively for our Premium Members:
Step-by-step Calculating Real $/TH with Financing
Step-by-step Calculation of the Payback Extension Due to Interest
