Genesis Capital experienced a further increase in cash and stable loans this quarter.
The lending group of Digital Currency's (DCG) OTC trading subsidiary released its latest "Instant Lending Instant Lending Snapshot" on Wednesday, noting that the increase in cash loans has been large enough to change its investment portfolio. loans of $ 450 million.
For the first time this year, BTC loans now account for less than 60% of Genesis' portfolio. The cash loan program increased from 23.5% of the company's active loan portfolio in the second quarter to 31.2% in the third quarter. Loans were denominated in USD or USD, such as USD, USD or PAX.
Despite the proportional decline of bitcoin, Genesis still has about $ 225.9 million in outstanding loans backed by BTC.
Matt Ballensweig, Head of Business Development at Genesis, told CoinDesk that the cash loans during the quarter were driven by the demand for cash in the cryptography industry.
This often comes from mining companies rich in cryptographic resources, which need funding to pay for overhead costs and electricity costs. However, cash loans are also tied to the Bitcoin spot price and market confidence.
Ballensweig said that while the market was optimistic about Bitcoin's prospects, institutional traders promised crypto to borrow fiat to finance the purchase of more Bitcoin. In what is known as a "base gap", leveraged investors capture the difference between depressed spot prices and the futures market.
"As long as your return on investment is greater than the cost of borrowing in bitcoins, it makes sense to do it," he said.
This mechanism was complicated towards the end of the quarter. Since mid-September, the forward price curve has flattened, resulting in a contraction of liquidity-based lending, which rose from $ 160 million in the second quarter to $ 140 million at the end of the year. third trimester.
According to the Genesis snapshot, investor interest in altcoins also increased quarter over quarter, mainly due to a jump in ETH and ETC-backed loans. Together, ethereum and ethereum classic now account for 10.5% of the company's total outstanding loans.
Ballensweig said the overall rise in the number of altcoins could be attributed to hedge funds and market makers with short-term exposure.
"Each quarter, the composition of altcoins varies depending on when hedge funds believe that the market has the opportunity to return to these assets," he said.
Genesis added $ 870 million in new loans and borrowings in the third quarter, up 17% from the second. This is the sixth consecutive quarter in which creations have increased, bringing to $ 3.1 billion the total amount loaned and borrowed by the company.
Image of Michael Moro, Genesis CEO, via the CoinDesk Archive