- Client: US Resident/National
- Net Worth: Over $20 million
- Financing Requirement: $6.5 million
- Terms Offered: 65% LTV
In this case, Enness assisted an ultra-high-net-worth individual in securing a non-recourse single-stock loan against their Bitcoin holdings to generate liquidity for further investment opportunities.
The client was an entrepreneur who had built their wealth through early investments in Bitcoin and stocks listed on NASDAQ. Their wealth was predominantly held across real estate and Bitcoin, creating a scenario where a significant proportion of their wealth was concentrated in assets that they did not necessarily want to sell to generate liquidity.
Cryptocurrency-backed lending can allow professional investors to raise finance against certain digital assets, with Bitcoin being one of the primary forms of collateral considered by specialist lenders. The proceeds can potentially be used for a range of purposes, including further investments, diversification or property purchases, depending on the lender and structure of the facility.
In this case, the non-recourse structure meant that the cryptocurrency provided the security for the facility without requiring a personal guarantee or additional security over the client’s other assets. This provided the client with a way to access liquidity while retaining their underlying investment position, subject to the terms and risks associated with the facility.
Cryptocurrency-backed lending can be particularly complex because digital assets can experience significant price volatility. Lenders therefore assess the underlying cryptocurrency, loan-to-value ratio and proposed structure carefully. Some specialist lenders may also offer additional mechanisms, such as call or put options, depending on the asset and transaction, to help manage aspects of the exposure.
For this transaction, Enness was able to source a specialist solution providing the client with $6.5 million of financing at 65% LTV. The facility allowed the client to access liquidity against their Bitcoin holdings without needing to sell the underlying asset, providing capital that could be deployed towards further investment opportunities.
This case demonstrates how crypto-backed lending can provide an alternative source of liquidity for sophisticated investors whose wealth is concentrated in digital assets. However, the suitability of this type of finance depends on the borrower’s circumstances, the digital assets being used as collateral and the lender’s criteria.
Risk Warning:
Cryptocurrency-backed lending carries significant risks. Cryptocurrency values can be highly volatile and may fall substantially, potentially resulting in margin calls or the loss of collateral. Borrowers should understand the risks associated with using digital assets as security and ensure they can meet the terms of the facility.
Disclaimer:
This case study is for illustrative purposes only and does not constitute financial, legal, tax or investment advice. Enness does not give advice on investments or cryptocurrencies, and lender introductions are unregulated. Finance is subject to status, underwriting, lender criteria and the specific assets being offered as security. Terms and availability will vary depending on individual circumstances.
Information contained in our case studies is for market and illustrative purposes only. In some cases, these may be made up of multiple cases and are for illustrative purposes only.
Some case studies are made up of enquiries that have come into the business, not all business completes, and the posting of a case study does not represent a completed piece of business.
Property values can fall as well as rise, and you may not get back the amount originally invested. Property investments can be illiquid and may take time to sell. Where borrowing is used, your property may be repossessed if you do not keep up repayments on a mortgage or other loan secured against it.
