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Ledn Inc. is betting on Bitcoin. The crypto lending company has just completed a historic sale of $188 million in cryptocurrency-backed bonds, marking a first in the secured debt market.
The operation includes two tranches of bonds, one of which secured an investment-grade rating with a spread of 335 basis points above the benchmark rate. Jefferies Financial Group structured the deal and managed the books. Over 5,400 consumer loans back these bonds, all secured by Bitcoin collateralized by borrowers. The weighted average interest rate of these loans reaches 11.8%, a level reflecting the high risks of the crypto sector. Jefferies noted that the transaction could pave the way for other similar issuances in the crypto space.
Major issue: Bitcoin’s volatility.
Crypto loans can turn into a nightmare if prices plummet suddenly. S&P Global Ratings believes investors retain partial protection thanks to Ledn’s algorithmic liquidation system. The mechanism automatically sells the Bitcoin collateral when certain default thresholds are reached. However, February exposed the system’s limits when a Bitcoin drop forced Ledn to liquidate a “significant portion” of loans intended for the operation. All liquidations remained below an LTV threshold of 81.4%, allowing the portfolio to adjust towards fewer loans and more cash while maintaining $200 million in total guarantees.
S&P delved into three crucial points.
The agency analyzed borrower default behavior, recovery rates during liquidations, and concentration risk. Margin-related defaults represent the toughest stress scenario since liquidations occur when Bitcoin prices fall. Ledn primarily grants loans based on Bitcoin collateral rather than borrowers’ credit profiles, which limits the usefulness of traditional consumer loan performance metrics according to S&P. Related coverage: Strategy buys 8 million in bitcoin.
At the “A” stress level, the agency applied a conservative assumption of 100% default. The stress modeled for the ratings includes a 79% default rate and a 68% recovery rate for the BBB- class A tranche. Not exactly reassuring.
S&P sees strong structural protections: over-collateralization, early amortization triggers, a liquidity reserve funded at 5% of the notes’ balance. Ledn’s automated liquidation engine has liquidated 7,493 loans over seven years without capital losses, a rather impressive track record.
Ledn plans to require cash interest payments for renewals starting in 2027. S&P believes this will reduce liquidity stress over time. Bitcoin is currently trading around $66,000, 46% below its October peak. Not great but stable lately.
On February 18, 2026, Ledn said the sale attracted strong institutional demand. The positive response reflects growing confidence in digital assets as loan collateral, despite Bitcoin’s volatility. A Ledn spokesperson stated, “The transaction was designed to demonstrate the viability of digital assets as strong collateral. It could change institutional investors’ perceptions.” This follows earlier reporting on Corporations Buy Bitcoin Aggressively Despite Major.
Jefferies noted that structuring required an in-depth analysis of Bitcoin risks. They highlighted that crypto volatility was a major factor in determining the issuance conditions. Ledn’s geographic diversification of borrowers helps mitigate some concentration risks – the loans reach borrowers in over 20 countries, reducing the impact of local economic shocks.
The market reacted positively to the news, with Bitcoin seeing a slight increase the following day. Some analysts view this as an indication of growing confidence in crypto-backed financial products. S&P warned that Ledn’s algorithmic liquidation mechanisms, while robust, require continuous monitoring to avoid hasty sales during abrupt movements. The success of the transaction could encourage other companies to explore similar financings according to the agency. Bitcoin still hovers around $66,000, a stability perceived by some analysts as a sign of the crypto market’s growing maturity.
The Federal Reserve closely monitors these new crypto financial instruments. Jerome Powell expressed reservations about the increasing integration of cryptocurrencies into the traditional financial system during his last press conference. U.S. regulators are currently studying a specific framework for crypto-backed bonds, with the SEC potentially issuing new guidelines by the end of 2024.
BlackRock and Fidelity are closely watching this evolution of the crypto bond market. Several institutional investment funds have reportedly shown interest in participating in future similar issuances, according to sources close to the matter. Appetite is growing despite the risks: MicroStrategy already holds over 190,000 Bitcoins on its balance sheet, while Tesla owns about 9,720. These massive positions by listed companies are gradually legitimizing Bitcoin as an institutional store of value.
