Ongoing Bitcoin Ecosystem Bear Market Proves to be Advantageous for Crypto Loan Providers
The falling crypto prices have not seemed to affect the spirit of crypto enthusiasts. Even though most crypto-based businesses took a hit, one seems to be booming; the business of crypto lending. In fact, some of the big names in the industry have revealed that the bear market in 2018 only accelerated growth in their industry.
Creditors are going after borrowers who want to hold onto their cryptocurrency until its value rises, as well as investors who want to borrow digital tokens to engage in short selling. To sum it up, lenders are playing both sides.
This is helping those who believe cryptocurrency prices will go higher by allowing them to cover the bills, while also lending digital tokens to people who think the price can fall further.
“It’s putting lenders on both sides of Bitcoin’s bust: Helping believers pay their bills while awaiting a rebound, and also enabling bets by people who think the drop has further to go,”said a Bloomberg report that came out a couple of days earlier.
Genesis Capital’s CEO, Michael Moro says that the bear market has been a blessing in disguise.
“The bear market has certainly helped — at least has fueled the growth. […] We’ve been profitable from day one. We’ve certainly proven that there is market demand, that there’s product fit and that it’s time to invest even more in this side of the business.”
The lenders had to actually adapt to stay in business, and adapt they did. The lenders now began lending cryptos and collecting fiat. Their biggest clients have been traders who engage in day-trading.
One of the companies that thrive in this scenario is New-York based BlockFi. The startup is backed by Mike Novogratz, online finance unicorn SoFi, Ethereum, incubator, Consensys and Morgan Creek among others. The firm lends out fiat for crypto collateral, but it requires a large buffer to secure a loan. To secure a $2,000 loan, which is the minimum, you require to deposit 1.09 bitcoins. Their CEO said that the client base has grown ten times in the second half of the year 2018.
BlockFi is, proposing to offer more credit products, that includes a bitcoin interest-bearing savings account.
“Everything flies in the bull market, but true magic happens when it does well in a bear market. The crypto-backed lending model is one of the rarest,” Aave CEO Stani Kulechov said.