A global platform specializing in bitcoin-backed loans, Lava, has successfully raised $200 million in funding and is set to launch an innovative product called the bitcoin line of credit (BLOC). This new offering allows users to borrow against their bitcoin holdings without the constraints of monthly payments or fixed terms that are common in the current market for bitcoin-backed loans.
The $200 million funding round combines venture and debt capital, featuring contributions from notable investors including Anthony Pompliano, a well-known bitcoin investor and entrepreneur, and Eric Jackson, an activist investor and founder of EMJ Capital. Jackson expressed enthusiasm about joining Lava, praising the team’s innovative approach to product development and highlighting that their revolving line of credit stands out in an industry often dominated by outdated offerings.
Lava claims to provide some of the lowest fixed interest rates in the bitcoin lending market, starting at a competitive 5% for one-year terms. The interest rates are reviewed and updated annually, enabling users to maintain their line of credit and refinance at any new rates that may be offered. Unlike traditional loans, this line of credit functions like a revolving account, allowing users to borrow, repay, and borrow again without concern for monthly payment deadlines.
According to CEO Shehzan Maredia, the firm’s objective is to enhance the borrowing experience for bitcoin holders. He emphasized that the BLOC product is fully aligned with user demand and will be a central focus for the company moving forward. The overarching goal is to provide users quick access to dollars while ensuring they benefit from the most favorable interest rates in the market.
In addition to the base interest rate, the line of credit includes a capital charge of 2% based on the highest outstanding balance during the year. For instance, if a user’s balance peaks at $5,000, the annual capital charge would amount to $100, bringing the total yearly cost of the loan to approximately 7%. This rate remains competitive compared to other bitcoin-backed lending options, many of which involve similar fees.
Lava allows for loans of up to 50% of the total USD value of the bitcoin held within its proprietary self-custody wallet. Notably, many of its loan products and USD payment capabilities do not require users to provide personal information, setting Lava apart in a market that blends elements of decentralized finance (DeFi) with contemporary crypto-friendly financial institutions.
Another significant feature of Lava is its “Liquidation protection.” This mechanism can automatically draw from the bitcoin balance within the app to bolster the collateral account, thereby protecting users from unwanted liquidation during periods of extreme price volatility in the cryptocurrency market. This added layer of security further enhances the appeal of Lava’s offerings for potential users in the rapidly evolving financial landscape of bitcoin lending.
