Digital currency prime broker Genesis reported a record quarter third of 2020 with $4.5 billion in spot volume — up 285% from the same quarter in 2019, $1 billion in bilateral derivatives volume — which was driven by the BTC spot becoming more tightly coupled to risk assets in the broader macro and the embedded optionality in DeFi, and $5.2 billion in new loan originations.
First, Grayscale announced its biggest quarter ever, the third time in a row, and now Genesis is reporting “tremendous growth in its lending business.”
According to its Q3 2020 Digital Asset Market Report, the company’s active loan outstanding grew 50% QoQ to $2.1 billion, adding $5.2 billion in new originations in just Q3, “marking its largest quarter ever by a landslide.”
Its Cumulative originations increased 61.5% from the prior quarter, seeing the tenth consecutive quarter of strong growth and bringing total originations to $13.6 billion since launching the lending business in March 2018.
“Our loan portfolio substantially increased in value through increased cash and altcoin loan issuance, along with a modest increase in the notional value of crypto loans outstanding.”
The report also noted a growing “appetite for yield” on digital assets as it recorded 165 unique institutional lenders, up from 47.3% from the previous quarter and 275% from last year.
But it hasn’t been Bitcoin that was driving this growth as BTC as a percentage of loans outstanding fell sharply QoQ from 51.2% to 40.8%. It was actually ETH, USD, and equivalents, and “other” altcoins drove the increase in book size in Q3.
The report further noted “ample cash on the balance sheets of top tier trading firms,” which indicates that there has been a significant increase in credit distributed by banks to prime brokerage lines across hedge funds, trading firms, and high net worth individuals.
This was also seen in the vastly increased institutional participation in the CME that became the second biggest futures market in OI this month.
And Genesis expects these trends to persist for at least another quarter because Federal Reserve balance sheet expansion may continue in Q4. This means CME growth can continue into 2021.