Game-Changing Bitcoin-Backed Loans, New ETF Filings & Nation-State Mining Set to Surge in 2025
News Block #69 (01/02/2025)
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Stone Ridge Hints at Game-Changing Bitcoin-Backed Loans
Happy New Year, everyone! Thank you so much for listening to the News Block. We had an incredible year of downloads, and it’s all because of you. We are so grateful. With that, let’s kick off 2025—which is shaping up to be a very big year for Bitcoin.
One of my favorite things about being part of this space is watching the Bitcoin industry mature and evolve over the years. It’s no longer just a niche computer science experiment; it’s becoming a cornerstone of the financial world.
We’re about to see Bitcoin weave its way into every corner of the traditional financial system, and today, some of the biggest financial institutions on the planet are creating Bitcoin products and services, making it easier than ever for investors—big and small—to access this new asset class.
This week, we caught wind of one potentially game-changing product that may soon hit the market.
In Stone Ridge’s Annual Shareholder Letter, CEO and Founder Ross Stevens hinted at a new initiative to revolutionize the Bitcoin-backed lending market through its subsidiary companies, NYDIG and Longtail Re.
So, let’s back up for a second. Here’s the challenge all Bitcoiners face: at some point, you’ll want to generate cash flow with your Bitcoin. Why? Because Bitcoin is money, and money is meant to be used. Whether it’s buying a house, funding a trip, or paying for school, we all need ways to live and fund our dreams.
Right now, there are two main options for turning your Bitcoin into cash flow:
1. Sell it. Obviously not ideal, not if you think it’s going to seven figures. Selling means giving up an asset that’s likely to appreciate over time, not to mention paying capital gains taxes. Or…
2. Borrow against it. This is the better option, but it’s not perfect. Bitcoin-backed loans today come with high interest rates—anywhere from 4.5% to 9.5%, according to Stone Ridge—and they require over-collateralization. That means you have to pledge extra Bitcoin just to secure the loan amount you want.
While some great companies have pioneered this space, the lending market is still far from efficient. And that’s where Stone Ridge comes in.
In the letter, Ross Stevens said the company is building the products they wish existed. The idea is to be able to borrow dollars against your Bitcoin—cheaply, flexibly, and on your terms. They’re calling it HODL loans.
Here’s where it gets really interesting: they plan to power these loans using insurance float.
"What’s insurance float?"When you pay an insurance premium, the insurance company collects your money upfront but doesn’t have to pay out claims immediately. During that waiting period, the company holds and invests that money to earn more. Think of it as borrowing money from policyholders at a low cost and then using it to make profitable investments. Warren Buffett mastered this strategy through Berkshire Hathaway—especially with Geico—to build one of the largest investment portfolios in history.
Today, insurance float is one of the largest investable capital pools in the financial system. In 2023, the U.S. insurance industry had an estimated $8.5 trillion in total cash and invested assets.
Stone Ridge just so happens to be in both the Bitcoin and insurance business. Its other subsidiary company, Longtail Re, is a reinsurance company with around $4 billion in assets.
In the letter, the company said, “NYDIG has facilitated billions of dollars of Bitcoin-backed loans and Longtail Re has invested billions of dollars of float in asset-backed loans, but none backed by bitcoin. Imagine float-powered HODLing.”
More competition in the Bitcoin lending market will make it more efficient, which will lead to cheaper loans.
Cheaper loans make it easier for people to borrow against their Bitcoin instead of selling it. And the less Bitcoin being sold, the more scarce it becomes. Scarcity drives up Bitcoin’s price, which accelerates its adoption.
As Bitcoiners, it’s products like this that get us even more excited for the future.
Six New Bitcoin ETF Filings Just Dropped
Turning now to the Bitcoin ETF market – it’s almost been one year since the spot Bitcoin ETFS were approved. 2024 was a huge year for these products, but this market is still in its infancy. This past week alone, we saw six new Bitcoin ETF filings, which tells us that interest in Bitcoin securities is booming.
Let’s start with ProShares, which just announced something really interesting. It’s proposing three new ETFs—one for the S&P 500, one for the Nasdaq-100, and one for gold. But here’s the twist: instead of being priced in dollars, these ETFs would be priced in Bitcoin.
So, how do they work? The ETFs invest in traditional assets like stocks or gold, but they add a Bitcoin twist by using Bitcoin futures. Essentially, they let you own these traditional investments while still staying tied to Bitcoin’s upside. It’s like asking, “What would these assets look like if Bitcoin—not dollars—were the standard?”
Why does this matter? For people who believe in Bitcoin’s long-term potential but also want to invest in other asset classes, these ETFs help you keep a foot in both worlds. You can diversify into traditional markets, like stocks or gold, without stepping away from Bitcoin completely.
Now, there is a catch – if Bitcoin continues to outperform other assets, the value of these ETFs in Bitcoin terms will go down over time. But for investors who want to hedge their bets and stay linked to Bitcoin while also holding more traditional investments, these ETFs offer an innovative solution.
Next up, Bitwise announced its Bitcoin Standard Corporations ETF.
This ETF will hold stock in companies that have adopted a Bitcoin standard and hold at least 1,000 bitcoin on its balance sheet. According to Bitcoin Treasuries dot net, brought to you by CoinKite, there are twenty-two public companies that hold at least 1,000 bitcoin today.
Bitwise also had some other criteria…a company has to have a market cap of at least $100 million and be above a certain daily trading volume threshold to be included in the ETF.
But there is one other interesting detail here….Unlike other ETFs, which typically give weight to stock holdings based on company market caps, Bitwise’s fund would assign weight to its holdings based on the market value of the firm’s Bitcoin treasuries, capped at a maximum weight of 25%.
This means a company’s Bitcoin holdings take precedence over everything else—its other assets, revenue, or market cap—when determining its importance and weighting in the fund.
This ETF could add some serious momentum to the Bitcoin Corporate Treasury movement.
Finally, let’s discuss Vivek Ramaswamy’s Strive Asset Management and REX. Both announced ETFs focused on giving investors access to Bitcoin-backed bonds, such as MicroStrategy and MARA’s convertible bonds.
Strive CEO Matt Cole explained Strive’s reasoning behind the launch of the product, saying, “Strive's first of many planned bitcoin solutions will democratize access to bitcoin bonds, which are bonds issued by corporations to purchase bitcoin. We believe these bonds provide attractive risk-return exposure to bitcoin, yet they are not available to be purchased by most investors,”
All of these creative Bitcoin ETF products bring two clear benefits to Bitcoin: they’ll add more liquidity to the market and make it easier for investors to gain exposure to this emerging asset class.
The Bitcoin Securities market is just getting started.
Nation-State Mining Set to Surge in 2025
Another development in 2024 that I expect will only continue this year is the trend of more countries using government resources to mine Bitcoin.
In its end-of-year report, VanEck highlighted that eight countries are now using resources to mine Bitcoin, up from two countries just four years ago.
Daniel Batten closely follows developments in the mining industry, and he estimates that the eight countries referenced are:
If the Republic of Congo is to be included, the number might have to be updated to nine countries since a national park there mines Bitcoin.
This trend has significant implications for the Bitcoin mining industry and helps explain why the hash rate continues to explode higher. In December, Bitcoin’s hash rate eclipsed 800 EH/s for the first time in history.
This just shows how nation-state adoption of Bitcoin continues to only move in one direction. Mathew McDermott, Global Head of Digital Assets at Goldman Sachs, was recently on CNBC and said it’s “conceivable” that more countries will start putting Bitcoin on their balance sheets.
In 2025, all eyes will be on the new administration in the U.S. and whether it will take nation-state adoption to a whole new level.
As we enter this New Year, it’s always good to step back and appreciate how, in just 16 years, Bitcoin has grown from an idea in a tiny, niche corner of the Internet to a strategically important global asset class.
Until next week, keep stacking.
- Sam & Nat
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Links to Items Mentioned in this Issue:
Stone Ridge Annual Shareholder Letter
U.S. Insurance Companies Hold $8.5 trillion
Warren Buffett’s History With Insurance Float
Six New Bitcoin ETF Products Are Filed
ProShares’ New Bitcoin ETF Product Filing
Bitwise’s Bitcoin Corporate Treasury Strategy ETF
Nate Geraci’s Tweet on New Bitcoin ETF Filings
BitcoinTreasuries.net
VanEck’s End-of-Year Bitcoin Report
Bitcoin Hash Rate Eclipses 800 EH/s
Trend of Governments Mining Bitcoin
Goldman Sachs’s Bullish on Nation-State Adoption