NYDIG, the Bitcoin-focused subsidiary of Stone Ridge, is exploring the integration of float financing into its Bitcoin-backed lending services, according to the firm’s 2024 investor letter.
The strategic move strives to provide Bitcoin holders with enhanced liquidity options while retaining their exposure to the cryptocurrency.
🚨 BREAKING: NYDIG to launch HODL Loans — efficient, low-cost Bitcoin-backed fiat loans designed to empower HODLers.
“Borrow at a low rate, in the right amount, at the right time — keep #Bitcoin off the market and accelerate fiat debasement.” 💥 pic.twitter.com/z7gQxnEfK9
— Swan (@Swan) December 30, 2024
NYDIG To Revolutionize Bitcoin Lending
Float, a concept commonly used in insurance and asset management, refers to investable capital sourced from premium payments or reserves. Stone Ridge’s Longtail Re, with its experience in deploying asset-backed loans, is positioned to extend this model to Bitcoin. The approach mirrors strategies employed by Berkshire Hathaway, which leveraged its float to achieve substantial financial growth.
The proposed float-backed Bitcoin lending model could redefine the market by unlocking major liquidity and increasing the utility of Bitcoin as a financial asset.
Marathon Digital advisor Sam Callahan lauded the move, highlighting its potential to channel vast pools of capital into the Bitcoin ecosystem. By reducing the need to sell Bitcoin for liquidity, this innovation could enhance scarcity, drive demand, and attract institutional investors.
Stone Ridge’s report draws a parallel between Bitcoin-backed loans and traditional stock margin loans, which shows Bitcoin’s competitive risk profile. Although Bitcoin-backed loans currently come with higher interest rates, he believes that increased market competition will align their pricing with Regulation T margin loans.
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