MARA Holdings, the public company with the second largest Bitcoin holdings, has lent out a portion of the 44,893 BTC on its balance sheet. This is according to a recent press release.
Of note, as of December 31, 2024, we had 7,377 BTC loaned to third parties generating additional return for our stakeholders.
From the press release
Robert Samuels, Vice President of Investor Relations at MARA, shared more information about the company's Bitcoin lending on the 𝕏 platform.
There has been significant interest in @MARAHoldings BTC lending program, so here's a bit more detail:
-It focuses on short-term arrangements with well-established third parties.
-Generates a modest single-digit yield.
-It has been active throughout 2024.
-The long-term...-
Robert Samuels (@RobSamuelsIR) January 3, 2025
A boost for the Bitcoin strategy
Companies that hold a lot of cash on their balance sheet usually use it to generate higher returns. For example, by investing in money market funds, which are generally made up of short-term bonds - i.e. loans.
For companies that are sitting on some Bitcoin, it can also be an option to let it "work" for them. This would generate a return measured in Bitcoin, which would be added to the potential price appreciation of the asset.
Bitcoin can of course be lent out. And if a company intends to save the Bitcoin, it can temporarily make it available to other entities in order to earn money from it.
According to Robert Samuels, MARA Holdings is earning a single-digit return on the 7,377 BTC currently on loan, which makes up around 16 percent of its total holdings. On an annualized basis, this could mean that the company could gain hundreds more Bitcoin.
At first glance, lending is an obvious way for companies with a Bitcoin strategy to generate more BTC per share, i.e. to increase the "BTC yield". However, this also comes with risks.
The problem with Bitcoin loans
In the Bitcoin universe, it has often turned out to be a fatal mistake to let Bitcoin out of your hands for a little more return. In 2022, for example, the lending platform Celsius collapsed after the company speculated with its customers' coins. Users then had to come to terms with the fact that they would probably never see the Bitcoin they had invested there again.
Even apart from the many problems in the crypto service provider landscape, it is not necessarily advisable to use Bitcoin for credit transactions at the moment. A key difference between Bitcoin and "fiat money" is that Bitcoin tends to become worth more and more. This means that borrowing Bitcoin, using it profitably and then paying back more Bitcoin can generally prove to be a major hurdle for borrowers - at least at the moment, when adoption is only just picking up speed and major price jumps are still to be expected.
Fiat money, on the other hand, loses value over time. This is even intentional. Central banks are aiming for a loss in value of 2% per year, even if the average inflation rate over longer periods of time is generally well above the 2% target. Accordingly, it is easier to repay euro or US dollar loans in the future than those in Bitcoin. Not only the borrower but also the lender must be aware of this risk, as the lender is dependent on getting the money back.
Even if some public companies use service providers for safekeeping anyway, they are forced to give up access to the coins with a Bitcoin loan. "Not your key, not your coins" has established itself as a motto in the community for good reason.
MARA Holdings is playing with fire
Although it's not clear who these "established third parties" are that MARA Holdings is lending Bitcoin to, there are already enough reasons to be suspicious. After all, who other than speculators would rather borrow an asset that is known to rise sharply in value than debasing fiat money? And is a single-digit interest rate enough compensation for the risk MARA Holdings is taking?
Whether a small return of less than 10 percent is worth accepting a total loss is ultimately up to MARA Holdings to decide for itself and its shareholders. However, if the loans including interest are paid in full, it was the right decision in retrospect - provided the company does not scare away any investors by taking this risk.
On balance, however, this is probably not the best way for companies to expand their Bitcoin holdings. It is not without reason that MicroStrategy, the largest corporate holder of Bitcoin, has not yet lent out any of the 446,400 Bitcoin it now holds. For the time being, it is unlikely that Bitcoin loans will establish themselves as a method for stock corporations to increase their "BTC yield" alongside the issue of shares or convertible bonds.
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