Crypto Lending Firm Genesis Capital Processed Over $1.1 Billion In Loans Despite 2018 Bear Market
Genesis Global Capital, which offers crypto loans to institutional firms in large amounts, has announced that it processed well over $1.1 billion in cryptocurrency lending and borrowings in 2018.
The Genesis Global Trading affiliate published its “Digital Asset Lending Snapshot” on Wednesday, January 30, which showed that the firm’s loan originations had doubled over the last three months of 2018.
Genesis Capital processed over $500 million in crypto loans in the six months between March and October last year. It again handled a similar figure in the last quarter of 2018.
According to the firm, the last one year saw a “meaningful increase in the number of market participants” who wanted to borrow and lend cryptocurrencies, thanks to client feedback and the blossoming derivatives markets.
Michael Moro, the company’s CEO, noted that the year-long crypto bear market might have played a big part in the firm’s revenue increase. He said that demand for both crypto and fiat loans grew dramatically over the year, especially from those shorting cryptocurrencies.
The snapshot shows that Genesis Capital had processed loans to the tune of $638 million and another $475 million in borrow by the end of 2018. Active loans stand at $153 million.
Per the provided data, the biggest chunk of the loans portfolio comprised bitcoin, with about 60 percent taken up the top crypto. XRP made up about 20 percent of the crypto portfolio while the other cryptocurrencies constituted the remaining percentage.
It is notable that the firm’s snapshot offers an “in-depth” preview of the firm’s loan book, and provides some interesting highlights about the crypto market ecosystem.
For example, there is a trend highlighted in the preview which seemingly dispels the view that it is short sellers that were to blame for last year’s scenario where most cryptocurrencies saw their prices fall.
Using ethereum as an example, Moro said that “short sellers tend to wait for the price of ethereum to go down before they get in,” and even though they are likely to exacerbate the selloff, “they’re not the catalyst.”
Moro added that most short sellers are “momentum traders,” which means that they are bound to “wait” for the downward momentum to kick in before they start shorting the given crypto.
The company’s report notes that Ethereum (ETH) borrowing rose in Q4, double figures recorded in Q3. However, ETH borrowings make up less than 10 percent of the firm’s loan book.
The price action in 2019, especially in the first few months, will dictate whether people will be willing to borrow more for shorting, Moro said. That, he added, will depend on whether the price is stable, rising or falling- the latter is likely to see the trend continue.
The bear market has seen a number of crypto firms lay-off their employees as the price crash necessitates restructuring to continue coping. Other companies have had to shut down operations.
But that hasn’t happened at Genesis Capital, the company’s CEO noted. The exec explained that this is the case due to the firm’s practice of hiring slowly, as opposed to in large blocks. The lender is thus planning on hiring more to grow its team as it looks to expand services to Europe and Asia.
Moro has estimated that the crypto loans market for the firm will expand in the next few years, the time that it likely will take for the crypto market to recover.
Crypto lenders have continued to post profits despite the market meltdown and Mike Novogratz’ Galaxy Digital reportedly wants to raise $250 million to advance loans to cryptocurrency firms.
Disclaimer: This is not investment advice. Cryptocurrencies are highly volatile assets and are very risky investments. Do your research and consult an investment professional before investing. Never invest more than you can afford to lose. Never borrow money to invest in cryptocurrencies.