As the price of bitcoin cratered last year, falling 83% and erasing $250 billion in market value, one company has secretly been making a killing with some rather unusual business transactions. Selling to a paradoxical mixture of bitcoin-believing crypto entrepreneurs and hedge funders out to profit off what they hope is the demise of cryptocurrency, bitcoin lending firm Genesis Global Capital originated $1.1 billion in cryptocurrency loans last year, according to a report released today.
Charging interest rates that ensure that its pockets get lined regardless of whether a customer loves or hates crypto, the company is leading the way as a rising tide of crypto startups compete to stay cash positive in this epic bear market.
“It should be possible for people to go long and short bitcoin,” says Michael Moro, the CEO of Genesis Global Capital. “It can’t just be a long-only market. It should be perfectly okay to take the other side, to think that prices are going to fall, and to make that short bet.”
Genesis passed the billion dollars in bitcoin loans milestone on December 14, 2018, less than three months after announcing it had made $500 million in loans since its launch in March 2018. To put that another way, Genesis made another $500 million in bitcoin loans during the last quarter of 2018.
As the price of bitcoin fell 39% over the last two months of the year, Genesis experienced its busiest period so far. New hedge funds and trading firms utilizing “spot” borrowing, combined with new business including crypto collateral—and even the occasional traditional cash loan in exchange for crypto collateral—increased Genesis’ active loans outstanding to $153 million, up from $23M in Q3 2018.
Interest rates on the cryptocurrency loans range from about 10% to 12% for highly liquid cryptocurrencies like bitcoin, depending on how risky Genesis deems the way the customer plans to use the loan. The less liquid the cryptocurrency, the higher the starting interest rate.
The massive increase in loan originations was jump-started by a 16% drop in the price of bitcoin on November 14, as a result of interest from short sellers looking to profit from the drop. Brian Kelly, a cryptocurrency investor who’s been a Genesis customer for five years, sees this kind of transaction activity as crucial to the health of the cryptocurrency ecosystem. “Having an active two-sided market should help liquidity improve overall,” he says.
To get the full read go to https://www.forbes.com/sites/michaeldelcastillo/2019/01/30/why-genesis-made-over-1-billion-in-bitcoin-ethereum-and-xrp-loans/amp/