Genesis Breaks Record with 38% Growth in Q3 Despite Bitcoin Price Losing 26% Value


  • The company continues to see strong growth though Q3 2019, sixth consecutive quarter of strong growth
  • But not many large institutional lenders actively participating
  • Demand for cash loans, led by Asia, increased for a 2nd consecutive quarter
  • International demand to borrow USD remained strong

Genesis Capital, the lending arm of Genesis Global Trading saw another record new originations of $870 million, breaking the last one of $746 from the previous quarter, announced the firm on Oct. 30.

Despite the decrease in Bitcoin price, active loans outstanding stood flat at $450 million, as of Sept. 30, 2019.

The originations saw an increase of over 38% QoQ, marking the sixth consecutive quarter of strong growth that brought the total originations to $3.1 billion since launching the lending business in March 2018.

Just like in Q2, international demand to borrow USD remained strong due to traditional banking frictions. As such, new USD issuance in Q3 took share away from active BTC loans.

Capital Flight Driving Demand for Cash Loans

Demand for cash loans — amongst miners, hedge funds, trading firms, and individuals — also increased significantly for a second consecutive quarter, representing 31.2% of Genesis’ active loan portfolio, up from 23.5% in Q2 and 14% at the end of last. From $40 million in Q2, it increased 4x to $160 million in mid-Sept.

Asia is leading this demand, with nearly 70% origination, out of the 45% of international outstanding cash loans from this region.

Chinese government restriction of Yuan transfers and currency flight in the country are the largest drivers of cash demand out of Asia. Also, the region is home to some of the largest bitcoin mining firms in the world that further contribute to this demand.

And every time a dollar is borrowed against BTC collateral, cash is either used for speculation, to purchase more BTC or leverage long or as working capital to pay for electricity.

“Both use cases are facilitating sell pressure on USD and foreign currencies, increased velocity on USD, and increased liquidity on the bid for BTC.”

Not Many Large Institutional Lenders Actively Participating

When it comes to service this demand, Bitcoin investors have limited ways to earn a yield on their assets so rates remain low on BTC as supply outsizes demand.

Return wise BTC-backed loans are similar to loans against real assets but the lender bears the direct control of the asset, as such, the lender can generate additional returns.

When it comes to the risk profile of Bitcoin, traditional lenders assume it to be more risky as it has volatility, bearer custody, and headline risk.

However, Bitcoin-based lending is in its early stages and “there aren’t many large institutional lenders actively participating.” Demand for cash in digital asset markets meanwhile is high and increasing over time and hence has reasonably high lending rates.

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