Genesis's lending business surges as trading firms hunt for yield

Quick Take

  • Genesis Global Trading saw the number of loans outstanding hit $1.4 billion in Q2.
  • Underpinning this growth was a hunt for yield among its trading counterparties.

Traders have been on the hunt for yield, benefiting one of the crypto industry's largest trading and lending shops. 

According to a second-quarter review of Genesis Global Trading's lending business, the total number of loans outstanding hit $1.4 billion in Q2, a 118% quarter-over-quarter increase. It added more than $2.2 billion in new originations, a 324% increase relative to the same quarter last year. 

Since the launch of the business, Genesis has originated more than $8.4 billion in crypto loans. 

In a statement to The Block, CEO Michael Moro said he was comfortable with the growth of the business, noting:

"The growth of our business is a function of many things, not the least of which is our risk framework. As long as the business is growing within our existing risk framework, I'm very comfortable with it."

Still, much of the quarter-over-quarter growth was the result of March's drawdown at the tail-end of Q1, according to Moro. 

"Unless crypto prices go up significantly, I do not expect anything near 120% QoQ growth going forward," he said. 

On the spot trading front, Genesis traded $5.2 billion worth of crypto in Q2. Meanwhile, its newly-launched derivatives desk saw $400 million worth of volume in  June. 

Traders seeking new yield opportunities underpinned this growth, Genesis said in the report.

"A major theme in Q2 was the demand for yield on crypto assets," the report said. "Yield drives markets in crypto and in other asset classes, but the last three months seemed specifically yield-centric."

The second-quarter was largely characterized by low volatility — which forced traders to look towards new opportunities for profit, as The Block previously reported. For Genesis, that translated into traders engaging with its business to execute on three main yield strategies. 

"The three forms of yield generation most prevalent are spot lending, call overwriting, and most recently, liquidity mining," according to the report. 

To further capitalize on opportunities in liquidity mining, or yield farming, hedge funds would borrow additional tokens to then deposit on platforms like Compound to earn yield. Traders moved quickly between various tokens, according to Genesis head of derivatives Joshua Lim. 

"The demand to borrow assets which have the most advantageous fee structures increases when the market is hot and rapidly decreases once the market is onto the next asset," the firm said. "At the start, we saw interest in BAT and REP skyrocket after those Compound markets were paying hefty fees. Over time, we have seen the demand normalize primarily to stablecoins like USDT, USDC, and DAI as they are easier to source and still highly profitable to farm."

These shifts can take one to two weeks, according to Lim. 


© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

About Author

Frank Chaparro covers the intersection of financial markets and cryptocurrency as Editor-at-Large. Since joining the publication in 2018 as its first reporter, he has played a key role in building The Block into a leader in financial journalism and research. He leads special projects, including The Block's flagship podcast, The Scoop. Prior to The Block, he held roles at Business Insider, NPR, and Nasdaq. For inquiries or tips, email [email protected]