One of the many use cases of Drawbridge Lending’s industry-leading Bitcoin-backed loans lies in the creative and low-risk setup of a recurring income stream. With simple lowFed-rate APRs, up to 65% LTV and one time payment, DBL loans leverage your Bitcoin to open the door to a high-growth investment for qualified individuals and institutions: cryptocurrency mining.
As the operational backbone of any functioning cryptocurrency network, miners provide the processing power needed to decentralize the tracking and transfer of digital assets. In return, they are often rewarded with the currency they help process. This regular reward is a profitable passive income source.
While upfront cost of the specialized technology and equipment can be significant, a Drawbridge loan is a highly effective means to leverage Bitcoin without having to liquidate it (a taxable event) or sacrificing upside profit opportunities.
Qualifying and Initiating
To qualify for a Bitcoin-backed loan, the miner must be an accredited investor or the organization must have a net worth of $1,000,000 or more. Qualified borrowers are then directed through the loan application process. The tenor is set at either 1, 2, or 6 months. The Loan-to-Value (LTV) percentages are set at 30–45% for 6 month and 60–75% for 1,2 month tenors (rates/terms are subject to change). Interest is set at a market-best 2.5% APR and there is no margin call or recourse
DrawBridge loans are subject to a price ceiling on the borrower’s collateral/coin. This means that if at the end of the loan, the price of the coin exceeds a price ceiling set at the time of the loan (the price ceiling range between 1.2x to 2x of the price of coin) the coin will be sold and the borrower will receive the proceeds less the loan principal and interest. The price ceiling feature substantially reduces the borrowing cost, enabling Drawbridge to offer such low interest rates and the borrower to profit from a significant price jump..
For Example: If BTC = $4k at loan inception and the price is at or above 2X at loan maturity (final day of the loan), the coin will be redeemed for $8k payable to borrower.
The benefits of Drawbridge products don’t end at the terms: during the lifetime of the loan, clients are guaranteed against margin calls at any point. Even if the price of Bitcoin drops substantially, Drawbridge will never request additional collateral or “true-up”. That security also protects against substantial drops in value: clients are free to forfeit their Bitcoin and SIMPLY KEEP THE CASH, even if the loan principal exceeds the value of the Bitcoin. Drawbridge will never take any recourse or pursue legal action against the borrower.
Qualifying and Initiating
The main benefit of a Drawbridge loan to cryptocurrency miners is that the loan proceeds can be used to fund a mining operation without immediate capital costs.
Most critically, the setup requires technology and equipment capable of handling the operational load of crypto mining. Bitcoin mining is difficult and requires ASICs (Application Specific Integrated Circuit) to effectively mine. Alternatively, many other cryptocurrencies can be mined with more-standard GPU graphics processing unit) cards. GPUs , while less powerful than ASICs, can be adjusted to mine any coin, but ASICs must be tailored to an exclusive target (in this case, Bitcoin). The technology must align with the miner’s strategy: a new miner looking to rotate coins would be best suited by a GPU, while an investor interested in single-coin exploitation could benefit from the increased power of an ASIC unit.
After determining the best rig to suit the target coin, a Drawbridge loan can cover the initial costs, ranging from small setups to full-scale “server farms”. The leverage afforded by DBL’s loan program can accommodate acquisitions of nearly any size, maximizing the potential revenue stream for clients. It allows for complete offset of capital costs, as many new setups can take months to break even in earnings. With Bitcoin collateralization and low fees, new setups can essentially be given time to pay for themselves.