Cryptocurrency brokerage firm Genesis’ lending desk has experienced a “year-end wave of deleveraging” as digital asset prices continue to fall in nearly three months cyclical decline, according to the company’s fourth quarter results. Increased regulatory scrutiny over digital assets, along with broader price volatility in a broader risky environment, has pushed crypto prices to multi-month lows.
Outstanding loans peaked at over $16 billion in mid-November – around the same time the global crypto market cap hit $3 billion. Bitcoin (BTC-USD) and Ethereum (ETH-USD), which account for the majority of crypto market capitalization, also peaked around the same time. Meanwhile, as more institutions participate in the crypto market, Genesis, one of the largest digital asset lenders, lent a record $50 billion in Q4 2021. This figure is up 40% from the prior quarter and 565% above its Y/Y print. .
- Active loan outstandings in the fourth quarter of $12.5 billion jumped 12% from the third quarter and nearly 3.3 times the outstanding amount in the same period a year ago.
- Spot trading volume in the fourth quarter was up 23% from the third quarter and 279% from the fourth quarter of last year.
- Fourth-quarter derivatives desk trading volume, which includes bilateral OTC trades, block-traded trades and exchange-traded volumes, of $20.7 billion, climbed 62% from the third quarter and more than 360% compared to the fourth quarter of 2020.
- The number of customers onboarded in the fourth quarter increased by 53% compared to the previous quarter. Note that Genesis Custody began staking assets for its clients during the fourth quarter, according to the report.
Digging deeper into the Genesis lending mix, it seems that much of the mix has shifted to USD stablecoins (USDC-USD) and Ethereum (ETH-USD) creations, as well as the return of Soluna (SOL-USD), Terra (LUNA-USD). ) and Avalanche rotation (AVAX-USD) executed by native crypto institutions to capture an outsized yield, according to the report. Of course, these tokens are the centerpiece of decentralized finance. Additionally, lending has sparked growing interest in DeFi 2.0 protocols and gaming tokens, signaling speculators’ appetite to position themselves further down the risk spectrum.
As interest in non-fungible tokens continues to grow – and even outpaces bitcoin (BTC-USD) – Genesis recently expanded its NFT-backed loan portfolio by “underwriting NFT collateral-backed loans” blue -chip “of high quality,” says the report. It would certainly be a risky “guarantee” in the event that the price of NFTs depreciates.
Beware of regulatory obstacles:
A series of digital asset companies, such as crypto lender Celsius Network, offer attractive competitive yields of over 6% on loans, and “without government regulation, this loan is as risky as a hand of blackjack. “, John Hopkins Economist Steve Hanke wrote in a Twitter Publish in mid-December. Recall earlier this week when crypto exchange Gemini, digital asset platform Voyager Digital (OTCQX:VYGVF) and Celsius have come under scrutiny from the Securities and Exchange Commission over their high-yield product offerings. Towards the end of September, Coinbase (NASDAQ:CURRENCY) said it would not pursue crypto lending after the SEC threatened to sue the company because the feature is considered a security. It is no surprise that the shares of Voyager Digital, Coinbase, as well as its rivals, are falling as much as 43% Year-to-date, as bitcoin (BTC-USD) continues to face selling pressure, it recently changed hands at $36.9,000 per token against its all-time high of 69, $4,000 starting mid-November.
Earlier this week, the SEC rejected Fidelity’s spot bitcoin ETF proposal.