Crypto lenders seem to be the only people who are benefitting in the current markets. After Bitcoin’s fall from grace last year, which led to a prolonged crypto winter, lenders are having a field day playing both sides of the market.
They are finding demand from borrowers against selling coins at low prices and also from large investors trying to burrow coins for shorting purposes.
The Double Whammy Brings Double Benefits
Crypto lenders are seeing increased demand from borrowers who are HODLing on to their crypto reserves and don’t want to sell their coins for a low price.
On the other hand, demand for borrowed coins is also strong among big investors who want to short digital assets.
This is putting crypto lenders in a good position, helping them get business from crypto enthusiasts who will HODL and crypto deniers who want to short the coins.
One of these lenders is BlockFi, whose customer base and revenue have grown by 10x since Mike Novogratz ‘s Galaxy Digital Ventures invested $52.5 million in their business in June 2018.
The company is planning to launch new credit products, including a loyalty card that earns crypto and a Bitcoin interest-bearing savings account.
ETHLend owner Aave recently opened an office in London and is nearing profitability while eyeing the US market.
Aave CEO Stani Kulechov commented on the situation, saying:
“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.”
Salt Lending, on the other hand, already employs an 80-strong team and growing revenues. It is hiring more everymonth as revenues increase.
Bad Times for Crypto Market = Good Times For Lenders
Most crypto lenders entered the business in 2017 when digital coins were happily moving to their all-time highs.
Initially, they would offer crypto enthusiasts a chance to borrow against their crypto reserves without having to sell them.
Post the market crash; lenders have now pivoted to different tactics and continue to flourish.
Overall, the bad times in crypto are good times for lenders. Michael Moro, Genesis Capital CEO noted:
“The bear market has certainly helped — at least has fueled the growth.”
His company, established in March last year, allows institutional investors to borrow virtual coins against US dollars.
Their customers have to deposit $1.2 million in fiat to borrow $1 million in crypto with interest going from 10 to 12%.
They have issued $700 million in loans already and have $140 million in outstanding loans.
The company wants to double its staff and expand to Asia this year.
“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.”