Hunt for Yield Drives a Record Q2 for Genesis Lending


Genesis released its Q2 2020 report where it revealed a “very strong growth” in direct lending and liquidity mining or “yield farming” and believes this growth will continue into Q3.

The crypto lending service provider added more than $2.2 billion in new originations last quarter marking it the “largest quarter ever,” with a 324% increase from the same quarter last year. Active loans outstanding also surged past $1 billion, representing a 118% increase QoQ.

After decreasing in the previous three quarters, its BTC loan composition increased in this quarter, which came mostly from due to a decrease in USD loan composition over the same period. Combined, BTC and cash dominates the loan portfolio at 83.2%.

“The infrastructure, maturity, and general interest in BTC/USD markets relative to altcoin/USD markets is much greater, and we don’t see that trend redirecting any time soon.”

Since its launch, Genesis has originated over $8.4 billion in cryptocurrency loans.

In Q2 2020, Genesis traded $5.25 billion in spot trading, up from $4 billion in Q1, the majority of which traded on an OTC basis. In its first full month of derivatives trading, it recorded $400 million in notional value, with 80% concentrated in BTC/USD.

Insatiable Appetite

The Genesis report notes the major theme in Q2 was the demand for yield on digital assets, which continues to drive markets with the last quarter being ‘yield-centric.’ The most prevalent forms of yield generation are spot lending, call overwriting, and, most recently, liquidity mining with “an insatiable appetite for all of them.”

This hunt for yield in Q2 led to tremendous growth, especially in June, in the total interest paid to that pool of lenders and the number of unique institutional lenders on its platform, up 24% from previous months and 187% from last year and. The report reads,

“It’s not surprising DeFi yield farming has impacted our lending business, particularly on the demand side. The demand to borrow assets which have the most advantageous fee structures increases when the market is hot and rapidly decreases once the market is onto the next asset.”

Moreover, a jump was seen in call option overwriting,

“as an alternative to spot lending, many of our counterparties are selling out-of-the-money call options to generate yield via premiums.”

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