Lenders are weathering the downturn in cryptocurrency better than other players, with the industry seeing strong demand from borrowers.
According to a report in Bloomberg, creditors are going after borrowers who want to hold onto their cryptocurrency until it goes up, as well as investors who want to borrow digital tokens to engage in short selling. In essence, 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.
Take BlockFi as one example. In an interview with Bloomberg, it said its revenue and customers have grown by 10 times since June, when Galaxy Digital Ventures invested $52.5 million in the company. BlockFi told Bloomberg that it's gearing up to roll out more credit products, such as a bitcoin interest-bearing savings account and a loyalty card.
Meanwhile, Aave, which operates the ETHLend crypto lending marketplace, just opened an office in London and is coming to the U.S. next. The company told Bloomberg it is close to being profitable. ETHLend is gearing up to license its technology to other lenders in Australia and Switzerland as well. Meanwhile, SALT Lending, which already has a staff of 80, is expanding its headcount each month as its business increases.
The report noted that many crypto lenders opened up in 2017, providing a way for would-be investors to borrow cash without having to sell bitcoin or other digital tokens. When the price of digital tokens plummeted last year, lenders started focusing on niche areas.
“The bear market has certainly helped – at least has fueled the growth,” Michael Moro, chief executive officer of Genesis Global Trading, told Bloomberg in a phone interview. “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.”
Genesis started in March, providing a way for institutional investors to borrow virtual coins. The company says it has issued $700 million in loans and has about $140 million in loans outstanding, with an average loan duration of six weeks. The company plans to boost its staff up to as many as 12, and is looking to expand in places such as Asia, reported Bloomberg. Customers are required to deposit $1.2 million in fiat to borrow $1 million worth of digital tokens, with the annual rate to borrow between 10 percent and 12 percent.
While the lenders are doing brisk business and have been able to thrive amid a steep decline in cryptocurrency, the industry isn't 100 percent immune. Bloomberg noted that SALT's initial coin offering is being scrutinized by the Securities and Exchange Commission (SEC).