More and more cryptocurrency ventures struggle for funding, has to cut staff or shut down. However, one small part of the industry is thriving: Lenders.
Lenders thrive in the cryptocurrency industry
According to Bloomberg, lenders that work in the cryptocurrency space do well even though the price of cryptocurrencies falls. They find strong demand from borrowers who do not want to sell their digital coins at low prices. The demand also comes from investors who want to borrow coins for selling short. Selling short means that the investors take advantage of falling prices and make money as the price goes down.
It puts lenders at both sides of the market. They help crypto bulls to pay their bills while waiting for the market to turn and also enabling people to borrow for short selling. Most lenders set up business during 2017. They initially offered customers to borrow cash without selling their cryptos, which they believed would gain more value. Even during 2018 when the price crashed, lenders found new niches and continued to flourish.
“The bear market has certainly helped — at least has fueled the growth,” Michael Moro, chief executive officer of Genesis Capital, said in a phone interview.
What companies work with Lending?
BlockFi is one of these companies. They say that their revenues and customer base have grown 10-fold since June. Around the time when Micheal invested $52,5 million.
“We’re excited to partner with BlockFi and jointly lead the way for financial institutions to participate in crypto investing strategies,” said Mike Novogratz, Founder of Galaxy Digital Ventures LLC. “A robust lending market is the keystone for financial systems and BlockFi’s institutional approach and deep lending expertise were key drivers in our decision to partner with them.”
Aave is another example which owns online crypto-lending marketplace ETHLend. They just opened an office in London, plans to enter the U.S. soon and is nearing profitability. And Salt Lending, which already employs 80 people, said it’s hiring more every month as its revenue ticks higher.
One of the more successful companies is Genisis, which launched in Marsch to let institutions borrow digital assets. They have issued $700 million of Loans. They plan to double its staff in the coming years, and it is looking at growing in Asia.
Bitcoin fell over 70 per cent since the start of last year. Companies that accept the cryptocurrency or its competitors as collateral for cash loans usually demand much larger buffers to ensure they don’t get burned by falling prices. New York-based BlockFi typically requires customers to deposit $10,000 of digital coins to take out $5,000 in fiat, said CEO Zac Prince.
Aave CEO Stani Kulechov also commented in a phone interview:
“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.”
Image Source: “Flickr”
Dennis Sahlström has been trading and investing since 2012 and has for the last two years been consistently profitable. He has been in the crypto- and blockchain space since the middle of 2017 and realized its potential for our world, not least how it is transforming the society we live in. He has now created an education platform, together with the wealth coach Marcus the Maria. They teach regular people how to invest and trade in the cryptocurrency market with proven strategies. If you want to learn more and feel like its time to get into this new asset class, download our free book and register to the next live training to get your future in cryptocurrencies started.