The bear market has been a bane for many crypto investors and related businesses that have struggled to remain profitable during continued price decline.
However, the niche market of crypto lending is currently booming despite the rest of the market and industry suffering.
Crypto Creditors Creating Opportunity Out of Market Despair
While some of the most prominent names in the cryptocurrency space – from Bitmain to Huobi, to crypto start-up incubator Consensys – are seeing revenue declines, closing down operations in some locations, and are laying off employees, crypto lenders such as Genesis Capital are raking in profits, growing, and even adding more employees during the current year-long bear market.
In fact, Michael Moro, chief executive officer of Genesis Capital told Bloomberg in a phone interview that the bear market itself “has fueled the growth,” of his business.
“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,” Moro elaborated.
Genesis is seeking to double its current staff and expanding into other regions including Asian territories, during a time when others are downsizing. “The bear market has certainly helped,” Moro said.
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Genesis Capital lends crypto to institutional investors at varying rates, with Bitcoin’s rate between 10 and 12 percent annually. Genesis launched in March of 2018 and in just nine short months has already issued $700 million in loans, with $140 million currently outstanding.
It’s not just Genesis that’s struck digital gold with the current bear market. ETHLend parent company Aave chief executive officer Stani Kulechov called crypto-backed lending “true magic,” because the business model continues to perform well during a bear market.
Crypto-Lending for Cash and Short Selling
There are two primary reasons for investors to consider crypto-related lending, with the latter having a great impact in the current market climate.
In one instance, and one that was more prominent during the 2017 bull run, investors put up their cryptocurrency holdings as collateral to take out a cash loans to do things like pay bills, or complete home renovations. Investors can obtain cash this way without having to fully cash out their holdings.
Related Reading | Short Positions Against Ethereum At All-Time High on BitMex
The other reason for collateralizing crypto assets is for short selling. Short sellers collateralize their cryptocurrencies to essentially place a bet that the price of a crypto asset will decline. When the open short is closed, the investor who placed the bet will receive either cash or an additional sum of cryptocurrency depending on how the contract is settled. Should the price increase while a short is open, a portion of the collateral will be lost.
Many investors who trade on margin are taking advantage of falling cryptocurrency prices in this way, bringing select profit to select few during a time when most others are watching their portfolio value’s bleed. It’s also helping the businesses that provide these options stay afloat and even thrive during the bear market.