{"id":5123,"date":"2020-03-05T13:00:24","date_gmt":"2020-03-05T13:00:24","guid":{"rendered":"https:\/\/www.newmoneyreview.com\/?p=5123"},"modified":"2020-03-24T06:54:50","modified_gmt":"2020-03-24T06:54:50","slug":"bitgo-enters-crypto-asset-lending-market","status":"publish","type":"post","link":"https:\/\/newmoneyreview.com\/index.php\/2020\/03\/05\/bitgo-enters-crypto-asset-lending-market\/","title":{"rendered":"BitGo enters crypto-asset lending market"},"content":{"rendered":"<p>Crypto-asset custodian BitGo is launching a new service for institutional clients, enabling them to lend out their bitcoin or obtain cash loans for cryptocurrency collateral, the firm announced today.<\/p>\n<p>\u201cBitGo has built a reputation for leading the industry in innovation, security, and client service, and we are now extending that expertise to BitGo Lending,\u201d said Mike Belshe, the firm\u2019s CEO.<\/p>\n<p><a href=\"http:\/\/beta.newmoneyreview.com\/index.php\/2020\/02\/10\/leave-crypto-custody-to-the-professionals\/\">Last month Belshe told <em>New Money Review<\/em><\/a> his firm was extending its crypto-asset custody business into Europe with the launch of new subsidiaries in Switzerland and Germany.<\/p>\n<p>\u201cWith our lending service, we are melding the best of Wall Street\u2019s sophisticated understanding of how to work with institutional investors, and the best of Silicon Valley\u2019s technology and innovation,\u201d Belshe said in a press release.<\/p>\n<p>Currently, the main player in the institutional cryptocurrency lending market is Genesis Capital, an affiliate of Genesis Global Trading, an over-the-counter (OTC) trading firm.<\/p>\n<p>Genesis Global Trading is wholly owned by Digital Currency Group, which also has an equity stake in BitGo.<\/p>\n<p>Genesis Capital says it has lent over $4bn since it started its digital asset lending business two years ago, with the pace of loans <a href=\"https:\/\/genesiscap.co\/insights\/q4-insights-2019\/\">recently picking up to over $1bn in the fourth quarter of 2019<\/a>.<\/p>\n<p>The firm said that 85 percent of its Q4 loan book consisted of loans of bitcoin, or of fiat currency backed by cryptocurrency collateral. The remaining loans were of less traded cryptocurrencies, primarily bitcoin cash, ethereum, ethereum classic and ripple.<\/p>\n<p>While much of the demand for cryptocurrency loans is driven by trading firms seeking to manage their inventory, demand for fiat currency loans that are collateralised by cryptocurrency has recently picked up strongly, <a href=\"https:\/\/genesiscap.co\/insights\/q4-insights-2019\/\">Genesis said in a recent report<\/a>.<\/p>\n<p>According to Genesis, demand for such cash loans is driven primarily by three factors.<\/p>\n<p>First, bitcoin futures have tended to trade at a premium to the spot price throughout 2019. Therefore, traders can borrow cash to buy the underlying spot bitcoin and sell the future, capturing an arbitrage premium.<\/p>\n<p>Second, said Genesis Capital, hedge funds and family offices often seek leverage to add to their positions, speculating the price will go higher. Third, rather than selling their existing coins, bitcoin miners often borrow in fiat currency against their cryptocurrency holdings to upgrade their equipment or for working capital purposes.<\/p>\n<blockquote><p>\u201cWe don\u2019t do prop trading, we don\u2019t do agency trading, we are a custodian and a fintech firm\u201d<\/p><\/blockquote>\n<p>BitGo told <em>New Money Review<\/em> its ambition is to function in a similar way to stock lending and repo businesses in the traditional financial markets.<\/p>\n<p>\u201cOur institutional clients have been asking for a service like this for a while,\u201d said Nick Carmi, head of financial services at the firm.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-medium wp-image-5126\" src=\"https:\/\/beta.newmoneyreview.com\/wp-content\/uploads\/2020\/03\/Nick-C-300x200.jpg\" alt=\"\" width=\"300\" height=\"200\" srcset=\"https:\/\/newmoneyreview.com\/wp-content\/uploads\/2020\/03\/Nick-C-300x200.jpg 300w, https:\/\/newmoneyreview.com\/wp-content\/uploads\/2020\/03\/Nick-C-1024x683.jpg 1024w, https:\/\/newmoneyreview.com\/wp-content\/uploads\/2020\/03\/Nick-C-768x512.jpg 768w, https:\/\/newmoneyreview.com\/wp-content\/uploads\/2020\/03\/Nick-C-165x109.jpg 165w, https:\/\/newmoneyreview.com\/wp-content\/uploads\/2020\/03\/Nick-C.jpg 1200w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/p>\n<p><em>Nick Carmi<\/em><\/p>\n<p>Carmi explained what he sees as his firm\u2019s distinctive approach.<\/p>\n<p>\u201cWe don\u2019t do prop trading, we don\u2019t do agency trading, we are a custodian and a fintech firm,\u201d he said.<\/p>\n<p>\u201cWe are not interested in a high-volume, low-margin business; we are building deep relationships with our clients to drive value for them and to create a long term, sustainable business.\u201d<\/p>\n<p>According to Carmi, wholesale bitcoin lending rates have recently varied from 2 percent to 5.25 percent per annum, with rates falling back to the bottom of the range after bitcoin\u2019s recent price fall from $10,500 per coin to the low $8,000s.<\/p>\n<p>Genesis Capital also recently observed a relationship between bitcoin lending rates and the cryptocurrency\u2019s price.<\/p>\n<p>\u201cIn both early June of 2019 and most recently, December of 2019, cash demand spikes have preceded moves in the bitcoin price. This will be an interesting dynamic to track over time,\u201d Genesis said.<\/p>\n<p>While wholesale bitcoin lending rates are in the low single digits, some retail-focused crypto-asset lending platforms <a href=\"https:\/\/www.blockfer.com\/earn-interest\/compare\/blockfi-vs-nexo\/\">currently offer clients up to 8 percent a year for lending out their cryptocurrencies<\/a>.<\/p>\n<blockquote><p>\u201cIt\u2019s an immature market and there are some bad actors out there\u201d<\/p><\/blockquote>\n<p>Carmi questioned the economic viability and safety of some of these businesses.<\/p>\n<p>\u201cIf I\u2019m lending out bitcoin at, say, 4 percent, there\u2019s no way I can pay you 8 percent,\u201d he said, \u201cso I wonder where these platforms are getting their rates from. My guess is that they may be rehypothecating their collateral or trading with the collateral.\u201d<\/p>\n<p>He added a broader note of caution for the cryptocurrency market.<\/p>\n<p>\u201cIt\u2019s an immature market and there are some bad actors out there,\u201d Carmi said.<\/p>\n<p>\u201cHopefully nothing will happen to cause people to lose their shirts. When you\u2019re lending, you need to know your risks very well and you need to know the clients and their strategies.\u201d<\/p>\n<p><em>Don\u2019t miss any more New Money Review content:\u00a0<a href=\"http:\/\/eepurl.com\/du6eTr\"><strong>sign up here<\/strong><\/a> for our\u00a0newsletter<\/em><\/p>\n<p><em><a href=\"https:\/\/blubrry.com\/newmoneyreview\/\">Click here<\/a> for a full list of episodes of the New Money Review podcast: the future of money in 30 minutes<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Crypto-asset custodian BitGo is launching a new service for institutional clients, enabling them to lend out their bitcoin or obtain cash loans for cryptocurrency collateral, the firm announced today. \u201cBitGo [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":4251,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1012,1053,1026,1014],"tags":[1154,1684,1683,1661,1685],"class_list":{"0":"post-5123","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-exchange","8":"category-featured-1","9":"category-latest-slider","10":"category-payment","11":"tag-bitgo","12":"tag-digital-currency-group","13":"tag-genesis-capital","14":"tag-mike-belshe","15":"tag-nick-carmi"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v24.3 - 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