Genesis Capital, the lending arm of over-the-counter (OTC) cryptocurrency broker Genesis Global Trading, has recorded robust digital asset lending activity from institutional borrowers.
The spin-off said in a report on Thursday that since launching in March, it had facilitated $553 million in digital currency loans. Some $327 million of the total was lent out to investors as a hedge against price or as leverage to increase bets against cryptocurrencies. The firm added that while many of its debtors have already paid their loans in full, there is still $130 million worth of outstanding loans — a number the company says has “steadily grown” despite the recent fall in cryptocurrency prices.
Notably, the particular assets borrowed shifted significantly in the March-September period. At launch, loans were denominated in Bitcoin (BTC) Ethereum (ETH) and Monero (XMR). With ETH price dropping, short-sellers tended to avoid the second-largest cryptocurrency over the following months. Meanwhile, demand for altcoins such as XRP, Litecoin (LTC), and Ethereum Classic (ETC) has risen. The share of Bitcoin on Genesis’ loan book fluctuated less than other assets, which the company attributed to the fact that it is “the most widely used asset for non-speculative reasons, like working capital in remittance and arbitrage trading across exchanges.”
The type of Genesis clients has also changed over time. Lending activity was initially driven by speculative hedge funds, but as derivative liquidity increased, more trading and arbitrage firms started using the platform.
“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,” Genesis said.
The report comes just days after Fidelity Investments announced the launch of a new company offering digital assets trading and storage services, joining a growing list of traditional financial services giants, including Intercontinental Exchange (ICE), Goldman Sachs, Citigroup, and Morgan Stanley, which have recently indicated interest in the nascent crypto industry.