In a move that could reshape the Bitcoin lending market, Stone Ridge subsidiary NYDIG is gearing up to channel one of the biggest capital reservoirs in traditional finance—insurance float—into BTC-backed loans. The news, detailed in the 2024 Investor Letter from Stone Ridge CEO Ross Stevens, immediately attracted attention across the industry after its publication on December 30.
A Potential Game-Changer For Bitcoin
Marathon Digital advisor Sam Callahan, commenting on X, framed the impact succinctly: “NYDIG is about to unlock one of the largest investable pools of capital in the entire financial system—insurance float—and channel it into Bitcoin-backed loans. This is a big deal.” According to Callahan, improved lending efficiency could lead to “lower loan costs,” reduced selling pressure on Bitcoin, and ultimately “increased scarcity” and “higher demand and price,” fueling more institutional interest and broader adoption.
Ross Stevens’ 2024 Investor Letter outlines how NYDIG, which has already facilitated billions of dollars in BTC-collateralized loans, intends to expand by leveraging “float.” In insurance and asset management, float refers to investable capital held in reserve, often used to generate returns while maintaining coverage obligations.
According to the letter: “Now that we know Bitcoin can generate cash flow upon a sale, how about using Bitcoin to generate cash flow upon a non-sale? […] Our Bitcoin subsidiary NYDIG is preparing to enable all HODLers, including Stone Ridge, to unsheathe their weapon – borrowed fiat at a low rate – in an amount, and at a time, that is right for them. […] Imagine floatpowered HODLing. […] Stay tuned.”
Stone Ridge’s vision positions Bitcoin-collateralized lending as potentially on par with traditional stock margin loans—both in risk profile and, eventually, in pricing. According to the letter, BTC’s realized volatility over the past five years falls within the 40th to 80th percentile of the largest 3,000 US stocks, suggesting it is “about as risky as a typical US stock.”
“That means Bitcoin-backed loans are realistically less, and certainly no more, risky than a plain vanilla, Reg T, US stock margin loan,”the letter states, pointing out that current bitcoin-backed loan rates—at “S + ~450 to ~950”—are out of line with the lower margin loan rates typical for stock financing. Stone Ridge projects a compression of this premium over time, pushing BTC-backed loans closer to the “Reg T margin loan neighborhood.”
Insurance float, famously leveraged by Warren Buffett’s Berkshire Hathaway (which increased its float from $114 billion in 2017 to $164 billion as of December 31, 2022), represents a massive well of investable capital. While Berkshire uses its float to finance acquisitions and investments, Stone Ridge aims to unlock similar avenues for BTC collateralization.
Bringing this vast capital supply into Bitcoin could generate a powerful network effect. Stone Ridge’s letter envisions a cycle where greater liquidity and lower costs prevent premature selling of BTC (“HODLing”), thereby reducing supply on the open market. This reduced supply, in turn, could bolster BTC’s price, driving more institutional interest and heightened adoption.
Callahan’s emphasis on the ramifications for BTC holders and the broader ecosystem echoes Stone Ridge’s bullish outlook: “NYDIG is about to unlock one of the largest investable pools of capital in the entire financial system… This is a big deal.”
If successful, the initiative would allow BTC investors to leverage their holdings without resorting to outright sales, preserving potential upside while accessing fiat liquidity. A more efficient lending market, Stone Ridge argues, would sustain Bitcoin’s scarcity narrative, further strengthening institutional confidence and opening the possibility of broader mainstream participation.
At press time, BTC traded at $92,881.
