Trending Bitcoin News and Market Sentiment January 31st, 2020: Crypto Loan Facilities in Great Demand Thanks to Rising Interest from Institutional Investors

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Bitcoin
  • Bitcoin touched a new monthly and yearly high at USD 9,633 during early Asian trading on Friday
  • The crypto loaning industry is growing at an ever-increasing rate, with demand from institutional investors fueling the rise of crypto lending platforms

 

Bitcoin bulls are having a good day, registering a high at the start of Asian trading hours in Beijing at USD 9,633 (CoinDesk), although momentum has been petering out since then, but consolidation is at a very health USD 9,325 at the moment.

If the scenario where Bitcoin stays above USD 9,000 continues for a few more days, then Bitcoin will have resisted that breakdown for the three or four days that many analysts are asking for to prove that bullish turn in on the way.

The Bitcoin rally has been starkly contrasting with not-so-good results in the stockmarkets. The US economy also does not seem to be willing to get excited, and US banks like JPMorgan Chase are reportedly finding it hard to achieve fast loan growth, even with interest rates very close to all-time lows.

Lending is, however, on the uptrend in the crypto industry.

Compared to only a 2.1% rise in the last quarter for US GDP and other lukewarm numbers reported elsewhere, crypto lenders have been seeing a boom in the last quarter in terms of lending activity

Genesis, for example, that lends cash and crypto, said that loans jumped a massive 21% during the last quarter to USD 545 million, thanks to incredible demand from wealthy investors as well as Asian and European small loan aggregators.

JPMorgan was only able to achieve a 2% growth, keeping in line more or less with the growth of US economy. Lending is a smaller circle in the digital asset market, and they still face down big competition from established banks for loans to crypto traders and businesses. This is because regulators are still employing a strict policy for risk management, and crypto is still deemed to be highly volatile, and therefore, not suitable to be loan collaterals for traditional lenders.

This does mean opportunity for crypto lenders, who are receiving a lot of demand in Bitcoin and stablecoin denominated loans. As such, investors are lining up to put up cash collateral to lenders like Genesis in exchange for interest rates as high as 8%.

Galaxy Digital and Winklevoss Capital have backed crypto lender BlockFi, who will be adding five to 10 new assets to its platform, including Lirecoin and USD Coin, and will follow it up this year with a credit card to offer Bitcoin rewards. Digital asset lender Celsius Network told CoinDesk that institutional clients were driving growth behind loan platforms:

“Obviously the crypto sector is not even a beauty mark right now compared with the banking sector, in terms of the size and maturity,” Genesis CEO Michael Moro said in a phone interview. “But there is rapid growth in this new market, and it’s not just us. There are other companies trying to accomplish similar things.”

As of last month, the entire industry of crypto loaning was estimated by Blockchain analysis firm Graychain Ltd to be worth at least USD 4.7 billion. And this isn’t even taking into account the number of platforms that have been mushrooming since.

So far, lenders have apparently roped in interest to the tune of USD 86 million since 2018, but the demand for more loans has been growing, with over 5,400 loans issued in Q1 2019, compared to more than three times that the following quarter. Volume is also climbing, with USD 64.8 million loaned out in Q1 2019 almost tripling to USD 159.3 million the following quarter.

In any case, all eyes now turn to Great Britain as they enjoy their final day of membership in the European Union. While the effects on the pound sterling are certain to be pronounced, will the uncertainty and fear in that region cause demand for Bitcoin to go up even higher? Only time will tell, as we like to say!

 

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