Genesis Capital saw another jump in cash and stablecoin lending this quarter.

The lending arm of the Over-the-counter trading subsidiary of Digital Currency Group (DCG) being the lending arm has published its latest “Digital Asset Lending Snapshot” as the noted that the surge in cash lending was significant enough to shift the firm’s $450 million lending book, this was done on Wednesday.

BTC-denominated loans presently represent less than 60 percent of Genesis’ portfolio for the first time this year. In the second quarter there was a growth in cash lending from 23.5 to 31.2 percent of the firm’s active loan portfolio in the third quarter. The loans were denominated in fiat or USD-pegged stablecoins like USDC, PAX, TrueUSD or USDT.

Genesis still has approximately $225.9 million in outstanding BTC-backed loans Despite bitcoin’s proportional decline.
The cash lending during the quarter was driven by demand for liquidity in the crypto industry, according to Matt Ballensweig- Head of business development at Genesis.
Some crypto-rich mining firms, who need financing to pay overhead and electricity costs mostly accrue to this lending. However, bitcoin’s spot price and market sentiment is also tied to cash lending.

Institutional traders pledged crypto to borrow fiat to finance the purchase of more bitcoin, as the market goes bullish on Bitcoin’s prospects, said Ballensweig.
In what’s called a “basis spread,” leveraged investors capture the difference between depressed spot prices and the futures market.

He stated that, “the cost of borrowing is good enough as long as your ROI [return on investment] is higher than the cost of borrowing.”

Towards the end of the quarter, this mechanism appeared somewhat. The forward price curve has flattened, contributing to a contraction in cash-backed loans from $160 million in the second quarter to $140 million at the end of the third as observed since mid-September.

Primarily driven by an increase in ETH and ETC-backed loans, investor interest in altcoins also grew quarter-over-quarter according to Genesis capture.

Presently, 10.5 percent of the firm’s total outstanding loans is now comprised of ethereum and ethereum classic.

Notably, the general spike in altcoin originations can be attributed to hedge funds and market makers gaining short exposure, Ballensweig stated.

However depending on when hedge funds think there’s an opportunity for the market to return on those particular assets, each quarters the composition of altcoins fluctuations” he said.

This is the sixth straight quarter that originations have increased as Genesis added $870 million in new loans and borrows in the third quarter, up to 17 percent from the second there by bringing the firm’s total amount to $ 3.1 billion as lent and borrowed loans.

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Credits: David Pan.

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