Bitcoin-Backed Bonds Facing Stress Test After Bitcoin Selloff, S&P Says
A $188 million bond deal backed by bitcoin loans faced early stress after a bitcoin selloff forced significant liquidations.Summary
Wall Street's first public bond sale backed by bitcoin loans, arranged by Jefferies for crypto lender Ledn, encountered turbulence following a sharp decline in Bitcoin's price since mid-January, which triggered margin calls.
This forced Ledn to liquidate about one-quarter of the loans intended to back the $188 million asset-backed bond deal. Consequently, the collateral pool shifted from being primarily supported by loans (initially $199 million in loans and $1 million in cash) to being backed more heavily by cash (roughly $150 million in loans and $50 million in cash), revealing structural fragility during sharp drawdowns.
S&P Global Ratings assigned ratings to the notes, noting that while liquidations occurred below an 81.4% loan-to-value (LTV) threshold, the structure's key risks include bitcoin's volatility and regulatory uncertainty. S&P highlighted structural mitigants like overcollateralization and an automated liquidation engine, but flagged concerns related to margin-driven defaults and Ledn's past practice of rolling loans.
(Source：Bitcoin Magazine)