Crypto lending has taken off despite the extended bear market of 2018, as these businesses took advantage by catering to both sides of the trade.
Crypto Lenders Playing Both Sides of the Field
During the extended bear market of 2018, as layoffs soared, and fortunes hemorrhaged, lenders were rubbing their hands in glee. It seems everyone was borrowing; bulls to avoid selling coins at post-crash values, and bears, so they could short them.
Most crypto-lending companies formed during the bull-run of 2017, offering a way to borrow cash against crypto-assets without selling them. When the market about-turned, so did the lenders role, who maintained and even extended profits without skipping a beat.
BlockFi reports ten-fold growth in revenue and customer base. The owners of ETHLend have just opened an office in London and plan to expand into the US soon. And Salt lending is adding to its 80 employees on a monthly basis as revenue increases.
HODLers vs. Shorters
Institutional investors wishing to borrow cryptocurrency can do so from companies like Genesis Capital, who have already issued $700 million in loans since their March 2018 launch. For around $1.2 million of fiat, they can take $1 million in bitcoin, paying yearly interest of 10-12 percent.
As Bitcoinist reported, HODLer levels are growing, as seen by the increase in yearly price lows. Those who use their tokens as collateral for cash loans generally need a much larger buffer against falling prices. BlockFi typically asks for a $10,000 deposit of coins to release $5000 of fiat. Interest rates start at 7.9%
If the collateral does fall in value, a customer may get a warning that holdings are at risk of being sold off. This allows the addition of more collateral to maintain the loan, or less often, for a customer to pay back the fiat and reclaim their collateral.
Expansion And Diversification
Crypto-lending businesses, it seems, are prospering, and many plan to diversify their product offerings. BlockFi is working on bitcoin interest-bearing savings accounts and crypto loyalty cards. ETHLend is working with partners in Switzerland and Australia to expand their geographical footprint.
As Stani Kulechov, CEO of their parent company Aave, says:
Everything flies in the bull market, but true magic happens when it does well in a bear market.
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