This bank stops loans backed by bitcoin hardware

Last Updated: 1 February 2023

For a while in 2021, there seemed to be no limit to the growth and interest in bitcoin. The price soared to unprecedented heights, and the world of bitcoin hardware and mining also grew steadily. Some financial institutions were even tempted to offer loans with mining hardware as collateral. BankProv is now phasing this out and wants to stop it altogether.

When you take out a mortgage, as a rule the house is your collateral. BankProv did the same with hardware. There seems little wrong with that, but mining hardware is not a secure investment. Mining rig prices have dropped considerably since the hype in 2021. That, among other things, caused BankProv to have to write off $47 million in loans.

To grow, many bitcoin companies took advantage of the cheap money in 2021. Interest rates were still low, the industry was hot and the bitcoin price cooperated.

Meanwhile, the world looks different. Competition is cut-throat and miners that grew too fast are now in dire straits. Below you can see the outstanding debts of public mining companies. They amount to hundreds of millions and sometimes even billions of dollars.

Debt is the most normal thing in a tech company’s balance sheet. But it has to be paid off.

The industry comes with risks. At a time when interest rates are still (relatively) high, miners need to keep their heads above water. Not surprisingly, we recently saw a flood of bitcoin heading towards exchanges. Not so long ago, you could fill financial holes with a new loan, using mining rigs as collateral if necessary.

Remarkably, though, the competition is still cut-throat. The hashrate is at an all-time high. The recent price hikes also help with that.

  • Gabriele Spapperi

    I first came into contact with Bitcoin in 2017 - and since then, the topic of cryptocurrencies has never left me. For this reason, I have also made BTC & Co. part of my profession and write as a freelance author for crypto publications.

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