The crypto market has been undergoing one of the longest bearish phase of all times. However, in spite of the current situation, Genesis Global Trading, one of the largest OTC cryptocurrency dealers saw a major surge in business.
The New York-based crypto trading shop revealed that its lending unit originated $1.1 billion in crypto loans in 2018. That volume was supported by substantially huge increase in demand from borrowers over November and December. The company, which is a subsidiary of Barry Silbert’s Digital Currency Group, is known to provide loans largely in Bitcoin, Ether, XRP, and other coins to institutional borrowers like hedge funds and OTC trading firms. According to the CEO of the company, Michael Moro, this increased interest in borrowers swelled up in the fourth quarter.
As per reports, the company originated a total of $500 million crypto loans in the fourth quarter of 2018 itself. This accounts for half of the loans which originated over a span of nine months.
Their annual report reads:
“On November 14th, the price of BTC(bitcoin) moved 16% in a single day, which jump-started a period of increased loan originations as short sellers piled on with unprecedented size… Many long-short hedge funds viewed breaking the $6,000 price floor as an accelerator through 5,000 and into 4000 range.”
CEO Moro said:
“The data basically shows that while shorting is certainly a reason for why folks have borrowed cryptocurrency from Genesis, it is not the catalyst for the price drop… And while shorting wasn’t the initial reason for the price decline, it’s possible that the magnitude of the price decline, as well as the length of the price decline, could potentially be attributed to folks shorting.”
As of December 31, 2018, Bitcoin accounted for 75% of Genesis’ lending portfolio, while XRP, now the second-biggest cryptocurrency by market cap, and Ether each make up around 8%. Demand for cash loans from cryptocurrency holders spiked during the market bust, which has led the firm to also launch a cash lending business in the fourth quarter. This was based on requests from investors who wanted to borrow US dollars using their cryptocurrency assets as collateral. Genesis loaned $20 million in the fourth quarter and aims to officially launch the business in the first quarter of 2019.