Business 24 October 2018

Ed Drake

Genesis Global lends $553M in crypto in 6 months

U.S.-based cryptocurrency lender Genesis Global Trading has released its third quarter figures, concluding an impressive first six months since the firm began lending back in March 2018.

Over the period, Genesis Global loaned some $553 million in digital assets, much of which was denominated in Bitcoin BCH, according to the company report. To the end of the period, there was $130 million in loans outstanding at the firm, which is an affiliate of Genesis Capital.

According to the firm, its loans were commonly used to hedge derivative investments, or to fund business operations with the backing of digital currency assets.

A majority of Genesis Global’s funds are borrowed at interest rates ranging from 5-7%, before being loaned at 10-11% in cryptocurrency. While BTC and ETH were popular in the firm’s early days, the decline price of ETH and the fundamental instability of BTC have seen interest shift to other cryptocurrencies like Bitcoin BCH.

As a result, BCH loans accounted for 3% of the total portfolio, up from 1.9% just three months previously.

Genesis Global also confirmed changing patterns in the borrowing behaviour of its clients, moving from consolidating working capital earlier in Q3, to the point of increasingly funding investment activity from hedge funds as the period played out.

In particular, hedge funds increasing short positions in some markets, while taking longer investments in others has fueled the rise in demand for lending over the last months of the reporting period. In the report, the firm confirmed it expected activity to continue to increase as derivative markets around cryptocurrencies continue to mature.

“Trading firms also saw increased opportunities for arbitrage and market-making as derivative liquidity increased across markets,” the company stated. “These firms generally borrow digital assets to trade against derivatives like futures and swaps. We believe this kind of activity will continue to pick up as derivative markets mature.”

In particular, much of the interest in BCH has been fuelled by the desire to borrow in a cryptocurrency people actually use, rather than merely as an instrument for speculation.

As more firms turn to borrowing in crypto over traditional fiat funding arrangements, it looks like Genesis Global will continue to improve on these results in the months to come.

Note: Tokens on the Bitcoin Core (SegWit) chain are referenced as BTC coins; tokens on the Bitcoin Cash ABC chain are referenced as BCH, BCH-ABC or BAB coins.

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