Lending platforms such as Ledn enable holders of Bitcoin to borrow money by using their cryptocurrency as security. The company says it originated more than US$1.4bn in Bitcoin-backed loans last year.
The problem facing digital asset lenders is that the pool of money available to them isn’t growing as fast as demand for loans, which is pushing up the cost of borrowing – the interest rates quoted on these platforms range from about 2% where the loan-to-value ratio is low to as high as just under 19%.
Specialised hedge funds, crypto-native asset managers and venture capital firms charge digital asset lenders lower rates than traditional financial institutions but cannot offer enough capital to keep pace with the planned expansion of the crypto-backed lending market.
The solution, according to Ledn Co-founder and CEO, Adam Reeds, is to tap into the asset-backed securities market, connecting Bitcoin holders who want liquidity with the deepest capital pools in traditional finance through a structure that bond investors are already familiar with.
Last month, the company sold US$188m of securitised bonds with the senior tranche coming in at 335 basis points over benchmark and the mezzanine at 650 over, giving a blended yield of 7.2%. These bonds are secured against more than 5,400 customer loans with a weighted average interest rate of around 11.8%.
“That gives us a funding channel that isn’t dependent on conditions in the crypto market and over time it should mean better, more stable rates for our borrowers,” says Reeds.
This is an important consideration given the sharp drop in the value of Bitcoin since October 2025. Reeds says the lending structure is designed to be conservative from the outset with loans originated at a 50% loan-to-value ratio, so the collateral is worth double the loan amount on day one.
“If Bitcoin’s price drops and the loan-to-value ratio rises to 70%, borrowers receive alerts and can take action by topping up collateral, making partial repayments or using our auto top-up feature, which lets them pre-authorise additional Bitcoin postings so it happens automatically.”
Reeds says this feature has significantly reduced the number of loans that ever reach liquidation, even in sharp selloffs.
If the loan-to-value ratio hits 80% and the borrower hasn’t acted, Ledn liquidates automatically. The system checks Bitcoin’s price every 60 seconds across every loan around the clock and when a threshold is breached, execution happens within three seconds through three separate liquidity providers.
“Fifteen institutions participated in the bond sale,” explains Reeds. “The senior notes were more than two times oversubscribed and we saw over three times demand on the mezzanine. The investor base was a mix with a large reinsurance company, several credit funds and hedge funds all taking part and we also had conversations with pension funds and life insurance companies during the roadshow.”
As performance data builds and the market matures, he expects the premium to narrow, following the pattern of other asset-backed securities market asset classes.
“For a first ever transaction in an entirely new collateral category, the spread was about where you would expect it to land,” concludes Reeds. “Investors don’t yet have deep historical models for Bitcoin-collateralised risk, so they are pricing in that novelty. If you think about where crypto credit was trading just a couple of years ago, it is actually a meaningful step forward.”
