Cryptocurrency lenders are faring well in an industry shedding its old skin of once overvalued projects with now flailing treasuries thanks to the recent cryptocurrency bear market.
Bloomberg reported Jan 2. that Crypto creditors are claiming strong loan demand from those in the industry who do not wish to sell their cryptocurrency at post-crash prices, while on the other side of the coin fueling the demand for speculators that need to borrow coins to short the market.
According to the report, cryptocurrency lending service BlockFi has grown its customer base ten-fold since June, when famous Bitcoin-bull Michael Novogratz’s Galaxy Digital Ventures invested $52.5 million in the project.
BlockFi CEO Zac Prince described the system as “low-risk” lending and said that the company had never had a loss of principal — and shouldn’t, provided they accurately manage liquidity and track volatility. Borrowers are notified of falls in collateral before a margin call that triggers if that collateral falls by 35 to 60 percent in value from the time the loan was issued.
Prince said that about 20 percent of BlockFi’s loans faced margin calls in 2018, but that many borrowers simply added collateral to prevent the call.
BlockFi’s interest rates begin at 7.9 percent p.a.
Genesis Capital, a firm that lets institutional investors borrow cryptocurrency for deposited U.S. dollars has now issued $700 million of loans to date and currently has about $140 million of loans outstanding, according to CEO Michael Moro — who also told Bloomberg that the bear market has “certainly helped” to fuel growth, adding:
“We’ve been profitable from day one, we’ve certainly proven that there is market demand, that there’s product fit and that it’s time to invest even more in this side of the business.”
Moro also said that Genesis is planning to double its staff this year to as many as 12 members, in a market that is seeing many cryptocurrency ventures looking to downsize and streamline the way that their capital is deployed.
The parent brand of decentralized crypto-lending marketplace ETHLend, Aave, is also nearing profitability and has recently opened a London office. CEO Stani Kulechov told Bloomberg:
“Everything flies in the bull market, but true magic happens when it does well in a bear market.”