Bitcoin Price Drop Forces Liquidations in Wall Street's First BTC-Backed Bond Deal

Wall Street's inaugural public bond sale backed by bitcoin loans has encountered significant turbulence following the cryptocurrency's recent price decline, according to reports from the Wall Street Journal.

Jefferies has been marketing a $188 million asset-backed security tied to loans issued by cryptocurrency lender Ledn. The structure packages one-year loans made to borrowers who pledge bitcoin as collateral, with bond proceeds funding additional lending activity.

However, bitcoin's roughly 27% decline since mid-January has forced Ledn to liquidate approximately one-quarter of the loans originally intended to support the deal. The collateral composition has shifted dramatically from an initial $199 million in loans and $1 million cash to approximately $150 million in loans and $50 million in cash.

S&P Global Ratings, which assigned ratings to the notes, reported the initial pool consisted of 5,441 loans to 2,914 borrowers, secured by around 4,079 bitcoin valued at approximately $356.9 million. The loans carried a weighted-average interest rate of 11.8% and loan-to-value ratio of 55.8%.

Despite the disruption, the transaction remains on track to close February 18. Ledn must now redeploy liquidation proceeds into new loans to generate sufficient interest income for bondholder payments. The bonds are expected to offer yields between three and six percentage points above benchmark rates.