Genesis Lending Report: The annual loan scale exceeds 1.5 billion US dollars, and fiat currency loans are very popular
Over the past year, crypto lending has flourished with the rise of the derivatives market.
On April 25, Genesis Capital, an institutional-grade crypto lending company, announced thatQ1 Borrowing Snapshot(Lending Snapshot), not only revealed that its loan scale since the launch of the cryptocurrency loan business in March 2018 has reached 1.53 billion US dollars, but also some interesting data and analysis.
1. The scale of borrowing continues to expand
In the first quarter of this year, the total amount of loans released by the company reached $425 million, a 15% increase from the end of 2018. In addition, cumulative loan volume has nearly tripled since the third quarter of 2018, and total outstanding loans have grown by more than 40%, reaching $180 million by the end of the first quarter of 2019. Genesis said that as market makers and high-frequency trading firms entered the market, the"BTC’s continued borrowing demand” and expects this trend to continue in 2019.
2. Bitcoin has become the most popular currency for lending, and fiat currency loans have become a rookie
In Q1 2019, Bitcoin loans accounted for 68%, XRP loans accounted for 6.7%, and ETH and LTC loans each accounted for 3.6%. Among them, since 2018, the ratio of Bitcoin to USD borrowing has been rising. U.S. dollar lending is a new business launched by Genesis at the end of 2018. Although it is still in the pilot stage, it currently accounts for 10% of the loan ratio.
3. Interest in Bitcoin shorting is fading
Michael Moro, chief executive of Genesis’ trading and lending business, said bitcoin shorting now accounts for only 3% to 5% of Genesis’s total bitcoin loans, down from about half in early 2018. Additionally, there was “significant short XRP volume” in Q3 2018, but this trend faded towards the end of the year and has not resumed so far in 2019.
But like Ethereum and Litecoin, short interest remains undiminished.
4. There is a strong correlation between changes in some currency prices and lending activities
In this report, Genesis shows a clear correlation between price movements and borrowing activity by the company's customers. The chart shows that as the price of Ethereum and Litecoin fell, the total amount of loans rose, and as the price rose, more loans were repaid. But for Bitcoin, there has been little correlation between loan volume and price so far in 2019.
Take Ethereum as an example here. Among them, "Prominence of ETH Loans" refers to the number of ETH loaned on that day/the highest number of ETH loaned in the first quarter. In early February, when the price of ETH was $100, the short position of ETH increased sharply, and the outstanding loans were in this period. quarter reached its highest level. After the price rose to $120 on February 7, the bears fell by 30%. A week later, the price rose again to $140, squeezing out a bunch of shorts.
Conversely, between March 20th and April 2nd, before the rise to the $180 level on April 15th, we saw a 33% drop in shorts, meaning borrowers anticipated a market rally and reduced their short positions in time . Bears continued to decline and closed at their lowest year-to-date levels as prices continued through April 15.
5. In and out
Genesis is currently mainly lending to exchanges and over-the-counter (OTC) trading departments. They tend to keep customers' funds in frozen or offline state, and then use the borrowed cryptocurrency for transaction settlement, mainly used for quick arbitrage in the market. price difference.
Additionally, clients of fiat lending tend to be hedge funds looking to get some extra operating cash without using client funds. They offer 120% crypto collateral, and if their fiat value falls below 105%, they get margin called.
Genesis also borrowed from big players, Moro said, including some early bitcoin investors. The company borrows at 4% to 5% and loans at 6.5% to 7.5%; the interest is paid in cryptocurrencies.
Genesis does not have a cold wallet for storing cryptocurrencies, and Moro said that once a borrower repays the cryptocurrencies, the coins are loaned to another customer from the hot wallet as soon as possible.
Cointelegraph previously reported that lenders in the cryptocurrency industry have weathered the recent crypto bear market better than other industries. "The bear market certainly helped, at least fueling growth," Moro had said.
The current crypto lending track has gradually become crowded. In addition to the established and large-scale Genesis Capital, Salt, and Nexo, emerging crypto lenders are also pouring in. For example, the recently launched deposit income account attracted $25 million in just two weeks Blockfi for deposits, Acre, which raised £5m in April this year, and cryptocurrency exchanges, which launched lending services, are all joining the fray.
Moro believes that the popularity of crypto-mortgage loans and fiat currency loans is due to investors' reluctance to give up the idea of holding cryptocurrencies, as well as the general maturity of the crypto lending market.
