Bitcoin Miner Hut 8 Borrows $50M From Coinbase for ‘Treasury Management Strategy’

Bitcoin mining company Hut 8 Mining today announced it has arranged a $50 million credit facility through Coinbase Credit, the subsidiary of America’s largest crypto exchange.

The Canadian company said it’ll use proceeds from the loan “for general corporate purposes.”

“This credit facility gives us additional financial flexibility,” Hut 8 CEO Jaime Leverton said in a statement. “At the same time, it ensures that we can maintain our dynamic Bitcoin treasury management strategy going into the halving.”

As of May 2023, Hut 8’s holdings stood at 9,233 BTC, worth roughly $280 million at current prices.

Sharing details of the agreement, Hut 8 said the facility provides a $15 million term loan that is expected to be funded either at or shortly after the closing of the agreement.

Furthermore, the loan agreement includes an option for an additional $20 million delayed-draw term loan tranche, which can be accessed through a second borrowing between one and two months after the closing.

Finally, there is an option for a third $15 million delayed-draw term loan tranche, provided within 15 business days following the completion of the previously announced merger between Hut 8 and U.S. Data Mining Group, better known was U.S. Bitcoin Corp.

“We have one of the largest self-mined Bitcoin stacks of any publicly traded company, and this credit facility allows us to maintain our HODL strategy while giving us financial flexibility,” a spokesperson for Hut 8 told Decrypt.

Hut 8 has established itself as a significant player in the Bitcoin mining sector, demonstrating a commitment to holding onto its BTC holdings despite the considerable financial challenges faced by the industry during the bear market of 2022.

Unlike several other major Bitcoin mining firms such as Marathon Digital and Riot Blockchain, which at one point last year had to sell more Bitcoin than they produced, the Toronto-based company has remained dedicated to its “long-standing HODL strategy,” retaining its holdings rather than liquidating them.

The “HODL strategy” refers to the practice of holding onto cryptocurrencies  for the long term, often driven by the belief in the potential appreciation of their value over time. In case of Bitcoin, as many proponents of the world’s largest cryptocurrency argue, this strategy could also be profitable considering the halving events that happen approximately every four years.

Bitcoin halving is a built-in mechanism designed to control the issuance of new Bitcoins and maintain scarcity of the leading cryptocurrency. Each halving results in Bitcoin miners’ reward reduced by half. The purpose is to gradually reduce the rate at which new Bitcoins are created, ultimately leading to a maximum supply of 21 million coins.

In February this year, Hut 8 and U.S. Bitcoin Corp, a Florida-based Bitcoin mining company, announced “a merger of equals,” with the to-be-established entity to be based in the U.S.

When completed, the merger is expected to result in creation of one of the largest crypto mining entities in North America with facilities across Ontario, Nebraska, and Texas.