This article comes frombloombergThis article comes from
, author Olga Kharif, translator Odaily Tea Cool.
In the cold winter, a large number of mines closed down and miners left. Bitmain, Huobi, Jinse Finance and other leading blockchain companies continue to report layoffs. According to incomplete statistics from the media, 213 blockchain media have already collapsed. Now, there are still hundreds of xx Finance and Economics, xx Blockchain has disappeared, the cryptocurrency market is devastated, but the cryptocurrency lending business is booming in the bear market.
Cryptocurrency lending quietly became a booming business in 2018, aided by the forces of longs and shorts, according to a recent report from Bloomberg.
Cryptocurrency lending became popular in 2017, with lenders offering Bitcoin enthusiasts a way to take out loans using digital assets as collateral.
Lenders are able to adjust to market conditions, although it is widely believed that growth in the niche will slow as cryptocurrency prices generally fall. As a result, the rest of the crypto industry is struggling, but the crypto lending market continues to expand and profit.
A number of cryptocurrency lending firms, including BlockFi, Salt Lending, and Genesis Capital, saw a significant uptick in revenue amid the bear market.
Michael Vovogratz’s investment firm, Galaxy Digital Ventures, invested $52.5 million in BlockFi after Bloomberg reported that cryptocurrency lending firm BlockFi’s revenue had grown tenfold since June 2018.
The company offers tokenized loans to customers who deposit cryptocurrencies. At the same time, BlockFi CEO Zac Prince also said that this is a low-risk loan type, and his company has never experienced a loss of principal.
Bitcoin has fallen more than 70% since the beginning of last year. Companies that accept the cryptocurrency as collateral for cash loans typically need a larger buffer to ensure they don’t lose out on falling prices, and customers typically need to deposit $10,000 worth of digital currency to withdraw $5,000 in fiat currency.
Zac Prince continued, “Our future is more like a diversified financial technology company, starting from lending, like SoFi, which started out as a student loan institution, and later expanded to mortgage loans, wealth management, and now savings accounts.
BlockFi is planning to offer more credit products, including a bitcoin interest-bearing savings account and a loyalty card with cryptocurrency rewards.
Its the bear market thats driving the business, Genesis Capital CEO Michael Moro said in a phone interview with Bloomberg.
We have been profitable from the first day. Our profitability proves that our products meet market demand and can make money. We will invest more in the loan business in the future.
Genesis Capital is now looking to double its workforce and expand into other regions, including Asia, in stark contrast to other companies scrambling to cut jobs. The bear market helped us, Moro said.
Genesis Capital provides loans to investors at different interest rates. Taking Bitcoin as an example, it charges 10% to 12% interest per year. Customers deposit USD 1.2 million in legal currency in Genesis to withdraw Bitcoin worth USD 1 million.
The company officially opened in March 2018 and has disbursed $700 million in loans in just nine months, with $140 million in outstanding loans and an average lending duration of six weeks.
Its not just BlockFi and Genesis Capital that have found this way to make money in the bear market, Stani Kulechov, CEO of ETHLends parent company Aave, called the cryptocurrency lending real magic because the business model still performs well in the bear market . He told Bloomberg that everything is fine in the bull market, and only a miracle can save the bear market, and cryptocurrency loans are that short-lived miracle.
ETHLend is currently working to provide technical support to other loan companies in Switzerland and Australia so that they can also accept cryptocurrency loans.
There are two main reasons why investors consider cryptocurrency loans. One reason is to obtain cash. For example, in the bull market of 2017, investors will use their cryptocurrencies as collateral to obtain cash loans for paying bills or Carry out home renovations, etc. Investors can obtain cash without having to sell their property.
Another reason is for short selling, which is closely related to the current bear market environment.
Short sellers take cryptocurrencies as collateral, essentially betting on an imminent drop in the price of the crypto asset. When the short position is closed, the betting investor will receive either cash or an additional sum of cryptocurrency depending on how the contract settles. If the price rises while short positions are open, investors will naturally lose some of their crypto assets.
