Crypto lender Genesis Capital released its Digital Asset Lending Snapshot today, revealing that it originated $425 million in loans in the first quarter and is currently lending more than 30,000 bitcoins. The lender, a spinoff of the Genesis Global Trading crypto platform, caters to institutional borrowers and says it has processed more than $1.5 billion in loans since its launch in March 2018.
Genesis CEO Michael Moro noted that while traders are taking short bets on altcoins like ether and litecoin, they are primarily using bitcoin for non-speculative purposes like working capital and remittances.
He suggests that this trend is partly because altcoin prices tend to track the price of bitcoin and experience more dramatic swings. “They’re a bit more illiquid, less frequently traded than bitcoin,” he says. And during a bitcoin price run, “you’ll see the magnitude of [their] moves be a little bit bigger.” Once a bitcoin run is over, altcoin traders tend to sell their short positions again.
The report also highlights differences in shorting behavior for different altcoins during February’s price squeeze: Traders who shorted ether, for example, closed out their short positions following major price rallies, but traders who shorted litecoin closed out their positions in advance. In other words, litecoin traders were able to get ahead of the market and time their shorts correctly, but ether traders were not.
The report suggests that this discrepancy may be due to “better information or better understanding of momentum in the asset.”
Genesis has also introduced a new cash loan business, which it says will add liquidity to a maturing crypto market and give institutions more opportunities to leverage long positions. Moro says the need for cash loans became apparent even in the worst of the crypto winter, with clients who didn’t want to sell their holdings at the bottom of the market but who still needed cash for their operating needs.
Loans like those have now given way to borrowers like hedge funds who are posting bitcoin as collateral to borrow cash to buy bitcoin again. “It’s an additional way to potentially enhance returns,” Moro says.