Demand to Borrow Bitcoin Declining While Ether sees Significant Increase: Genesis Q1 Report

The company saw a “tremendous” amount of interest from treasury executives, taking positions in bitcoin for the first time.


Genesis, a wholly-owned subsidiary of Digital Currency Group (DCG) which is also the parent company of Grayscale, released its Q1 2021 report that shows that it facilitated over $60 billion in digital asset trades, loans, and transactions across the quarter.

The institutional digital asset lender and prime brokerage service provider reported an increase of over 25% of total activity in volume from corporates. There has been a tremendous amount of interest from treasury executives, which is expected to continue throughout the year. Matt Ballensweig, Head of Institutional Lending at Genesis said,

“If 2020 marked the beginning of the institutional epoch in crypto, the first quarter of 2021 was a Cambrian explosion of institutional inflows into crypto assets of all stripes.”

While spot saw $31.5 billion in volume, a jump of 287% from the previous quarter, $10.5 billion were traded in its OTC market, which was a surge of 133% QoQ. Much of this growth, Ballensweig said, came from new market participants, “many of whom are corporates taking positions in bitcoin for the first time.”

The key drivers of growth were higher frequencies of trades and increased notional per trade from crypto-native hedge fund clients.

In Q1, the company recorded over $20 billion in new originations, increasing 163% from the previous quarter. Active loans outstanding meanwhile have gone up 136% to $9 billion.

Genesis saw growth for twelve straight quarters in cumulative originations, which increased 94% to bring the total originations since launch in March 2018 to $40 billion.

The company recorded a decline in bitcoin borrowing demand, which, as we reported, was also noted by BlockFi, which as a result decreased the interest rate on its crypto assets for the second time in just two months.

This drop in BTC yields is due to the supply side expanding while the demand side has fewer low-hanging opportunities.

“BTC basis and funding arb still very much present- turning a lot more institutional heads to seriously look at crypto yield opps,” noted Ballensweig.

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However, its loan portfolio increased substantially in value through a combination of new issuance across cash, ETH, and Decentralized Finance (DeFi) assets. The biggest increase was in ETH borrowing, from 15.5% in Q4 2020 to 27% in Q1 this year.

ETH and other altcoins now represent 35% of Genesis’s lending business. The report notes the institutional adoption of ETH, which became a major theme on the back of DeFi’s growth with EIP 1559 providing deflationary catalyst bolstering ETH’s monetary premium.

“With the rise of DeFi protocols, and yield opportunities on platforms including Compound, Uniswap, Sushiswap, Aave, and Maker, there are more openings for traders to arbitrage Centralized Finance (CeFi) lenders with DeFi.”

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