Crypto miner Hut 8 gets $50 million loan from Coinbase

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Hut 8 Mining Corp., one of the largest public bitcoin mining companies, said it signed a $50 million credit facility with a unit of Coinbase Global Inc.

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The deal comes as bitcoin miners prepare for a pre-scheduled event on the digital asset's blockchain, called a halving.

The update halves the number of tokens rewarded to its miners, which has been the main source of revenue for those companies, every four years until the supply reaches its cap of 21 million around 2140. The reward will drop from 6.25 to 3,125 bitcoin to miners who successfully process a unit of data on the network in 2024.

“This line of credit gives us additional financial flexibility,” said Jaime Leverton, CEO of Toronto-based Hut 8, in a June 26 statement. “At the same time, it ensures that we can maintain our dynamic bitcoin treasury management strategy. going halfway."

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Hut 8 has been one of the few bitcoin miners still holding onto the coins they mine during the prolonged market downturn.

While that helps these companies become bitcoin proxies and attracts those who want exposure to the digital asset in the stock market, the strategy also encourages miners to seek additional cash since they are not selling their holdings of bitcoin. bitcoin.

Bitcoin miners have enjoyed a breather due to Bitcoin's price rally this year, but inflated energy costs, the mounting debt they racked up since the last bull market in 2021, and increasing competition among miners have hampered their recovery. . It has been difficult for them to raise capital from debt financing after a surge of crypto lenders went bankrupt due to multiple mergers last year.

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Hut 8's shares have more than tripled this year to around $2.90, after falling nearly 90 percent in 2022.

The line of credit matures 364 days after the date of the first loan and the obligations under the line are secured by Hut 8's interest in certain bitcoins held in the custody of Coinbase Custody Trust Company, LLC. The line of credit will be subject to maintaining a specific loan-value relationship.

All amounts borrowed will bear interest at a rate equal to the greater of the federal funds rate on the applicable loan date and 3.25 percent, plus 5 percent.

Bloomberg.com

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