Wednesday, January 30, 2019

Genesis lent out 1 billion in crypto loans - Business Insider

While the crypto market trended lower last year, one of the largest over-the-counter cryptocurrency dealers saw its lending business boom amid the brutal selloff.

Genesis Global Trading, the New York-based crypto trading shop, said its lending unit originated $1.1 billion in crypto loans in 2018. That volume was supported by a big uptick in demand from borrowers over November and December.

The company, a subsidiary of Barry Silbert's Digital Currency Group, lends out loans largely in Bitcoin, Ether, XRP, and other coins to institutional borrowers like hedge funds and OTC trading firms.

The company initially rolled out the lending product last March, and demand for its crypto loans kept growing since then. But interested from the borrowers swelled in the fourth quarter, said Genesis Chief Executive Officer Michael Moro.

Read more: Galaxy Digital, the firm founded by bitcoin king Michael Novogratz, is raising a $250 million fund for crypto firms in need of cash

In the fourth quarter alone, the company originated a total of $500 million crypto loans, accounting for half of the loans originated over a span of nine months. Borrowers were mostly taking short positions against the crypto market.

"On November 14th, the price of BTC(bitcoin) moved 16% in a single day, which jump-started a period of increased loan originations as short sellers piled on with unprecedent(ed) size," Genesis noted in its annual report. "Many long-short hedge funds viewed breaking the $6,000 price floor as an accelerator through 5,000 and into 4000 range."

Although declines in crypto market were not triggered by short sellers, that trading strategy did deepen the downturn in the crypto market, according to Moro.

"The data basically shows that while shorting is certainly a reason for why folks have borrowed cryptocurrency from Genesis, it is not the catalyst for the price drop," he said. "And while shorting wasn't the initial reason for the price decline, it's possible that the magnitude of the price decline as well as the length of the price decline could potentially be attributed to folks shorting."

As of December 31, 2018, bitcoin accounted for 75% of Genesis' lending portfolio, while XRP, now the second-biggest cryptocurrency by market cap, and ether each makes up around 8%.

Read more: 3 top fintech investors give their top predictions for cryptocurrency in 2019

The firm also launched a cash lending business in the fourth quarter, inspired by requests from counterparties who wanted to borrow US dollars using their cryptocurrency assets as collateral. Many of them didn't want to sell their digital assets at depressed prices, but they still wanted to get funding for their businesses, Moro said. Genesis loaned $20 million in the fourth quarter and aims to officially launch the business in the first quarter of 2019.

Demand for cash loans from cryptocurrency holders spiked during the market bust, helping lenders grow quickly and luring others into this space.

A number of crypto loan lenders like BlockFi and Salt Lending saw their business boom last year. Galaxy Digital, the crypto bank founded by former Goldman Sachs partner Michael Novogratz, is raising at least $250 million for a credit fund to offer US dollar loans to crypto firms.

Sign up here for our weekly "Wall Street Insider" newsletter, a behind-the-scenes look at the stories dominating banking, business, and big deals.



https://read.bi/2Gg8AY2

No comments:

Post a Comment