Loan Portfolio Update and State of the Market

Although we typically wait until quarter-end to share our views and insights, we think it’s particularly important to update our counterparties now on our loan portfolio given the extreme market volatility in the last few weeks. There is much to comment on, but we’re going to keep this update brief and expand more in our 2020 Q1 Digital Asset Lending Snapshot, which will be published in mid-April.


It’s been a wild ride, but we’re proud to highlight that our trading and lending businesses have both performed extremely well during the second largest intraday price drawdown in bitcoin’s history. Although this note will focus primarily on Genesis lending, it’s important to highlight that our trading business has been robust and consistent over the past two weeks. We have managed to execute, hedge, and settle all our trades as usual. The trading desk continues to provide liquidity to counterparties looking to trade and we expect to continue to see two-sided, active flow with counterparties’ trading around existing positions as well as deploying fresh capital (both long and short).

On the lending side of our business, we continue to be well-capitalized, faced neither capital losses nor defaults, and all of our borrowers either made timely margin calls or worked with us to deleverage positions in an orderly manner. This period of high volatility was a great stress test for risk management systems, both for us and the overall sector. We continue to provide liquidity to digital asset credit markets while leveraging our world-class risk framework to ensure we can fulfill all obligations and drive yield to our lenders.

Loan Portfolio Update:

  • We experienced no capital losses or defaults from our borrowers during the most recent drawdown in digital asset prices.
  • We have fulfilled – and will continue to fulfill – all our principal and interest payments to lenders across both crypto and fiat loans.
  • We have an increased amount of confidence in our borrowers, lenders, and the other service providers in the lending space after operating through one of the largest drawdowns in BTC’s history.
  • We’re continuing to grow and expand our business and we continue to provide meaningful liquidity to institutions within lending markets.

State of the Lending Market:

March 12th – March 20th

  • The rapid decline in the price of bitcoin led to the spread between the March BTC future price and the BTC spot price collapsing in a short period of time. This allowed trading firms the opportunity to exit their short basis position and unwind cash loans.
  • Lenders of cash and crypto needed capital on hand for liquidity gaps in both crypto and traditional markets, causing a series of capital calls.
  • We saw an unprecedented amount of BTC outflows which reduced the availability of new capital in lending markets.
  • Settlements across exchanges and OTC desks significantly slowed due to the supply constriction, lack of new issuances in the credit market, and a congested BTC mempool.
  • Rates on crypto and cash loans increased over the last week as supply decreased.

March 20th – Present

  • We’ve seen markets start to normalize over the last few business days as the BTC price has rallied back over 75% from the local low of $3,800 USD/BTC.
  • We’re starting to see new issuance in credit markets again with an increase in collateral requirements across the board.
  • Futures curves have flattened significantly after backwardating for only a week.
  • Global markets remain highly volatile and we don’t anticipate this changing anytime soon.

Finally, after two weeks of working remotely, we’re grateful that our business can continue to thrive in the current state of the world. However, we understand this is an extremely challenging environment for many market participants and, although we can’t control the situation, our line is always open. We’re happy to chat anytime – after all, we’re all in this together and we want to see our clients emerge on the other side stronger than ever.

Please don’t hesitate to reach out with any questions.

Michael Moro

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