Lava, a global platform for bitcoin-backed loans, today announced a $200M funding round and the launch of a new product, a bitcoin line of credit (BLOC). The product offers similar functionality to a securities-backed loan or home equity line of credit, but allows users the ability to flexibly borrow using bitcoin as collateral without the monthly payments or term limits common in the bitcoin-backed loans market today.
According to a press release shared with Bitcoin Magazine, the $200M financing “includes a combination of venture and debt capital” and brings two new high-profile angels on board: Anthony Pompliano, Bitcoin investor and entrepreneur, and Eric Jackson, activist public markets investor and founder of EMJ Capital.
“I’m thrilled to be joining Lava as an investor,” says Jackson. “Shehzan and his team are world-class, and they’ve been incredibly innovative on the product side. Not only is their revolving line of credit a first in the industry, but they’ve also managed to secure the lowest borrowing rates for their users— beating the rates of much older incumbents in the space. This is hands-down the best product in the market, and Lava is setting a new standard for bitcoin-backed loans.”
As a result of the new fundraising, Lava now offers what may be the lowest fixed interest rates available in the bitcoin lending market, “starting at just 5%” for year-long durations. “The interest rate will update yearly, and you can simply leave your line of credit open to refinance at the new rate.” According to their announcement blog. Lava’s line of credit functions more like a revolving account: users can borrow, repay, and borrow again at any time, with the interest rates only being marked for the amounts borrowed, not the total capacity of the loan.
“We believe that this is the best possible borrowing experience for bitcoin holders. You can get dollars instantly, you don’t have to worry about monthly payments or loan durations, and you get access to the lowest fixed interest rates,” said CEO Shehzan Maredia, adding, “This has been their most requested product and will be Lava’s core focus moving forward.”
Beyond the 5% fixed interest rate, the line of credit carries “a capital charge equal to 2% of the largest outstanding balance you have on your line of credit during the year,” as explained in their FAQ. For example, if the user’s loan balance reaches $5,000 at some point throughout the borrowing period, the capital charge for the entire year is $100. Bringing the total cost of a bitcoin-backed loan to roughly 7% yearly, a rate that remains very competitive within the bitcoin-backed loans market, as many companies also have similar fees on top of the interest rate.
Loans can be up to 50% of the total USD value of the bitcoin balance of the Lava app, a powerful and modern closed-source self-custody wallet. Most of the loan products and USD payment rails can be accessed without personal information, making Lava stand out among its competitors, placing it somewhere between pure DeFi and more modern crypto-savvy financial institutions. Lava also has a “Liquidation protection” feature, which can draw from the bitcoin balance deposited into the app and add it to the collateral account to protect users from liquidation in the case of extreme price volatility in bitcoin.
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