The $50 million credit facility offered to Hut 8 is split into several installments, with $15 million set to be paid out shortly after the deal closes, $20 million between one and two months following closing, and another $15 million after a previously announced merger between Hut 8 and U.S. Data Mining Group, Inc. has been completed.
The deal with Coinbase comes in the run-up to the next Bitcoin halving, which is expected to take place in April 2024.
During the halving, the reward paid out to Bitcoin miners will be cut in half, from 6.25 BTC per block currently, to 3.125 BTC.
Secured by Bitcoin held in Coinbase custody
According to Hut 8’s press release, the proceeds from the loan will be used for “general corporate purpose.”
The credit facility will mature 364 days after the first borrowing, the firm further said.
It added that obligations are secured by Hut 8’s interest in Bitcoin held by Coinbase’s professional custody arm, and said the credit facility will be subject to a specified loan-to-value (LTV) ratio.
“This credit facility gives us additional financial flexibility,” Jaime Leverton, CEO of Hut 8, said in a media statement.
“At the same time, it ensures that we can maintain our dynamic Bitcoin treasury management strategy going into the halving,” he added.
Hut 8 is one of just a few large-scale Bitcoin miners what follow a “hodl” strategy, which essentially means that it chooses to keep as many of the BTC it mines as possible on its balance sheet rather than selling for fiat.
While great during Bitcoin bull markets, the “hodl” strategy inevitably puts firms like Hut 8 in difficult positions during prolonged market downturns, a likely reason why the firm has now taken the $50 million loan from Coinbase.
Shares of Hut 8, a Toronto-based company that is listed in both Canada and the US, have more than 200% since the beginning of the year, fueled by improved sentiment in the spot Bitcoin market.
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