Crypto Firm Ledn Sells Bitcoin-Backed Bonds In ABS Market First
Summary
Crypto lending firm Ledn Inc. has made history by selling $188 million in securitized bonds backed by Bitcoin, marking the first-ever transaction of its kind in the asset-backed debt market. This innovative move highlights the evolving landscape of cryptocurrency finance.
Key Insights
What are asset-backed securities (ABS)?
Asset-backed securities (ABS) are financial instruments created by pooling smaller loans or assets, such as consumer debt or Bitcoin-collateralized loans, and issuing securities backed by the cash flows from those assets. This process, called securitization, allows originators like Ledn to transfer risk to investors, improve capital efficiency, and access new funding.
Sources:
[1]
What makes Bitcoin-backed ABS unique and risky?
Bitcoin-backed ABS, like Ledn's $188 million deal, use loans collateralized by Bitcoin as the underlying assets, introducing volatility risks not typical in traditional ABS backed by stable assets like mortgages. A sharp Bitcoin price drop can trigger automatic liquidations, altering the collateral pool and reducing yields, as seen in the 27% decline leading to 25% of the pool being liquidated into cash.
Sources:
[1]