Lava, the global platform for Bitcoin-backed loans, today announced a $200 million funding round and the launch of a new product, the Bitcoin Line of Credit (BLOC). The product offers similar functionality to securities-backed loans and home equity lines of credit, but gives users the flexibility to borrow using Bitcoin as collateral without the monthly payments or term limits common in today’s Bitcoin-backed loan market.
According to a press release shared with Bitcoin Magazine, the $200 million funding “includes a combination of venture capital and debt capital” and will include two new high-profile angels. Anthony Pompliano, a Bitcoin investor and entrepreneur, and Eric Jackson, a public market activist investor and founder of EMJ Capital.
“I am excited to join Lava as an investor,” said Jackson. “Shehzan and his team are world class and incredibly innovative on the product front. Their revolving credit facility is not only an industry first, but they have also managed to secure the lowest borrowing rates for users, surpassing the rates of much older incumbents in the space. This is without a doubt the best product on the market, and Lava is setting a new standard for Bitcoin-backed loans.”
As a result of the new funding, Lava now offers the lowest fixed interest rates available in the Bitcoin lending market, “starting at just 5%” for one-year terms. “Interest rates update annually. Keep your line of credit open so you can refinance at the new rate,” according to the announcement blog. Lava lines of credit work like revolving accounts. Users can borrow, repay, and borrow again at any time, and interest rates are shown only on the amount borrowed, not on the total loan capacity.
“We believe this is the best borrowing experience for Bitcoin holders. Get your dollars instantly, don’t have to worry about monthly payments or loan terms, and enjoy the lowest fixed interest rates,” CEO Shezan Maredia said, adding, “This is our most requested product and will be at the core of Lava going forward.”
As explained in the FAQ, above the 5% fixed interest rate, lines of credit are subject to a “capital fee equal to 2% of the maximum outstanding balance of the line of credit per year.” For example, if a user’s loan balance reaches $5,000 at some point during the loan term, the annual capital charge will be $100. The total cost of a Bitcoin-backed loan will be around 7% per year, and interest rates continue to be very competitive in the Bitcoin-backed loan market, as many companies charge similar fees on top of interest rates.
Loans are possible up to 50% of the total USD value of your Bitcoin balance on the Lava app, a powerful and modern closed-source self-custody wallet. Lava stands out among its competitors because most loan products and USD payment rails can be accessed without personal information, placing it somewhere between pure DeFi and more modern crypto-savvy financial institutions. Lava also has a “liquidation protection” feature that allows users to protect themselves from liquidation in the event of extreme Bitcoin price fluctuations by withdrawing from Bitcoin balances deposited into the app and adding them to a collateral account.
The post Lava raises $200 million in Bitcoin-backed credit facility, announces new borrowing rates starting at 5% was first published in Bitcoin Magazine and written by Juan Galt.
