Half a billion borrowed: Institutional crypto lending is booming, according to the Genesis Global report

October 19, 2018

A grim and depressing bear market still has a firm clutch on the cryptocurrency market, but one branch of the market has recorded remarkable numbers – crypto lending is thriving as Genesis Global Trading reports in their Q3 report.

Genesis Global Trading is an industry leader in over-the-counter digital currency trading but also launched an institutional-focused crypto lending service which registered a striking $553 million in crypto loans in only 6 months.

Half a Billion In Crypto Borrowed In 6 Months

The report titled “2018 Q3 Digital Asset Lending Snapshot,” states that the lending service established in March of 2018, to go along with the already-established OTC desk.

Source: Genesiscap.io

Despite the price fall of cryptocurrencies, the lending activities were surprisingly lively and 60+ customers of Genesis borrowed more than half a billion dollars in only 6 months. The company states:

“Over the past year, through client feedback and the rise of derivative marketplaces, we saw a meaningful increase in the number of market participants wanting to borrow and/or lend digital currencies. We built this new business segment to meet those demands and have experienced an incredibly strong reception since our launch.”

The lending branch of the company was launched as an experiment and the popularity of it took the company by surprise.

The company further states that their customer are exclusively institutional ranging from hedge funds, trading firms and other companies that use digital assets as “working capital”. Current outstanding loans to be paid back to Genesis is $130 million according to the report.

Genesis elaborates the motives of their customers:

Hedge funds generally have thesis-driven views on assets and borrow to short for prolonged periods. Trading firms, on the other hand, borrow to quickly arbitrage discrepancies in the market and avoid directional risk. Lastly, companies borrow as a means of working capital to scale their businesses, such as remittance payments to customers.

As for the particular cryptocurrencies that were borrowed, Bitcoin and Ethereum were the forerunners, as one would expect. However, with the big drop in Ethereum price, its popularity on Genesis also fell so customers started borrowing in other coins like XRP, LTC or ETC.

At the start of the third quarter in 2018, BTC represented about 50% of our outstanding loans, ETH 25%, and other assets 25%. This trend continued until the first week of August, when ETC short interest spiked and ETH short positions lost steam, likely because of price action. As ETH short interest closed near the lows, we saw that interest shift to other alternative assets. Specifically, LTC, XRP, ETC, and Bitcoin Cash (BCH) all drew higher demand while supply constrained, driving rates on most alternative assets higher.

The report is summed up with a conclusion that the expected lending volume will keep growing and as the crypto derivative markets mature, there will be more demand from hedge funds that trade against these derivatives like futures or swaps.