Genesis Lending Records the “Strongest” Quarter Ever, Traditional Institutions also Interested in Bitcoin & Stablecoins

  • Genesis recorded a 149% quarter-over-quarter (QoQ) increase from $181 million in the first quarter
  • A strong uptick in USD and “stable coin” borrowing along with the BTC price increase drove much of this growth
  • Many non-digital currency focused institutional investors also participated in lending, leveraging long, and short-selling

In the second quarter of 2019, Genesis posted its best quarter since launching its business in March 2018. Originating over $746 million in loans and borrows, registering a 48% quarter-over-quarter increase, revealed the Q2 report of the digital currency trading and lending company.

Demand to Borrow Increases with the Bitcoin Price

Out of all the assets, Bitcoin accounts for the highest share of 62.5% among the company's lending services.

One of the major structural shifts in the market has been the contango, a situation where the spot price of a commodity is lower than the forward price, in the futures market of BTC.

This, the firm says increases the demand to borrow cash because, for one, investors leverage their holdings by borrowing cash against BTC collateral and then using the cash to buy more BTC. Hence, most cash organizations in this quarter have been in June when BTC traded from $8k to nearly $14k.

Another reason is the opportunity to capture the basis spread between spot and future. This is attractive to many traditional firms familiar with trading in other asset classes as it’s a relatively low-risk way to exploit the steep forward curve.

This results in a reduction in the BTC interest rate while the supply of BTC available for lending increases.

Increase in Demand for Stablecoins, Traditional Institutions Becoming more Comfortable with Digital Currencies

When it comes to cryptocurrencies, BTC is followed by Ethereum but with a much smaller share of 3.9% and then Liteocin and XRP with 3.7% and 2.5% share respectively. Bitcoin Cash (BCH) and ETC account for less than 1%.

USD and equivalents including USD, PAX, and USDC also have “strong” demand, accounting for a big share of 23.5%. But not everyone has a USD bank account and cross-border wires can be inconsistent that increased the demand for stablecoins.

Using stablecoins, the company says forces traditional institutions to understand how to set up a wallet and transact using an address, increasing their digital currency knowledge and comfort level.

This trend is helping to provide a

“suitable bridge towards understanding and interacting with decentralized digital currencies.”

In light of the past two quarters' performance, the company forecasts a “continued growth” for the rest of the year.

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