Home music industry Cryptocurrency lending sees growth, fueled by ghost banks: analyst

Cryptocurrency lending sees growth, fueled by ghost banks: analyst

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KEY POINTS

  • Analyst Ryan Anderson: Crypto Lending Looks To Be At Least A $5 Billion Market Today
  • The transformation of modern credit markets has contributed to the entry of new lenders
  • Crypto lending business is a mix of transaction patterns that couldn’t be combined at first

Crypto lending is growing at a rapid pace as modern lending markets transform with the spread of “shadow banks” in the East and the evolution of “direct lenders” in the West.

Credmark, a cryptocurrency credit bureau in Singapore, said the crypto lending market stood at $8 billion in total lifetime loans in the last quarter of 2019. The market size is believed to have increased significantly after that. and now exceeds $10 billion in total. loan arrangements.

Crypto lending refers to the lending of digital assets through cryptocurrency exchanges or lending sites.

Speaking to the International Business Times, Ryan Anderson, head of trading at investment management firm Wave Financial Group, said: “The evolution of shadow banking and direct lending has paved the way , at least intellectually, out of all sorts of banking transactions. the traditional bank.

Shadow banks refer to lenders that operate outside the realm of the regulated banking space, unlike traditional banks and other financial institutions. They are non-custodial banks and generally serve as intermediaries between investors and borrowers. The United States is the largest shadow banking market, followed by the United Kingdom and China.

The People’s Bank of China (PBC) and the Insurance Regulatory Commission (CIRC) in China are shadow banks. Bear Stearns and Lehman Brothers, whose failure precipitated the global financial crisis in 2008, were also shadow banks.

Shadow banking should fill the lending gap created by problems faced by traditional lenders in the wake of the COVID-19 pandemic, according to a report in the Wall Street Journal.

Bitcoin mining equipment maker Bitmain has been sued by its client who claimed the company was illegally mining bitcoin from its customers’ devices. Here, bitcoin mining hardware is shown during a bitcoin conference at the Javits Center in New York, April 7, 2014. Photo: Andrew Burton/Getty Images

In a note entitled “Best of New Worlds of Generating Yields from Crypto Lending” Anderson said the exit from the traditional lending realm sparked the growth of crypto lending. “When direct lenders began to offer businesses broader credit terms in the post-2008 recovery and banking institutions were left on the sidelines, this opened up the possibilities for the evolution of lending and borrowing to the future,” he told the International Business Times. .

Speaking about the size of the crypto lending market today, Anderson said. “Combining numbers from the biggest players like Genesis, Celsius, and BlockFi, as well as factoring in contributions from decentralized finance apps, crypto lending appears to be a market of at least $5 billion today. compare, Bitcoin futures volume – financial instruments that allow investors to gain exposure to Bitcoin without having to hold the underlying cryptocurrency traded on the largest exchanges totals approximately $5 billion per day.

Transactions vary from those involving borrowing cash with crypto-collateral, lending cash and cryptocurrencies as an investment, and borrowing cryptocurrencies against other cryptocurrencies.

“Cryptocurrency lenders who saw the evolutionary path early attempted to do much the same thing – cryptocurrency lending – and with great success,” Anderson said. New York-based Genesis Capital, one of the largest bitcoin lenders serving institutional clients, said that in the first quarter of 2020, active loans were up about 20% from the previous quarter, reported. Forbes.

Coinbase, one of the largest cryptocurrency exchanges in the United States, has announced its intention to enter the lending business. It plans to allow U.S. retail customers to borrow fiat loans of up to 30% of their bitcoin holdings in the fall. “Customers can use Bitcoin-backed loans in different ways depending on their financial needs,” Max Branzburg, product manager at Coinbase, said in a post on the Nasdaq website.

Anderson is optimistic about the future prospects of crypto lending and thinks he is sure it will grow in the future. “As long as people want to trade cryptocurrencies, the loans will be there. The existence of a deep and liquid lending market is intimately linked to the proper functioning of derivatives markets like those for futures and options, and as these gain in popularity, lending will also increase,” a- he declared.

He added that even if trading somehow becomes less popular, crypto-rich players will seek to find alternative investments for their capital, which will spur creative development in lending and other areas.

In the United States, cryptocurrencies are not considered legal tender. However, cryptocurrency exchanges are legal, although regulations vary by state. The data of the Law Library– the world’s largest law library in Washington, DC. – shows that the legality or restrictions regarding cryptocurrencies vary by geographical area.