(Bloomberg) — Genesis, one of the largest cryptocurrency brokerages for institutional investors, said it originated more than $44.3 billion in loans in the first quarter, a decline from the record $50 billion level in the prior quarter, amid a weak market environment.
The loans were mainly driven by new institutions entering the industry and by increasing demand for cash loans, the company said in a statement Friday. Genesis, a subsidiary of Digital Currency Group, lends to borrowers such as crypto funds which use the assets to short digital currencies, hedge investments, or invest in yield-generating platforms.
“Institutions continue to develop their crypto strategies and strengthen their understanding of this industry, even amid the market uncertainty that has marked the start to this year,” Genesis Chief Executive Officer Michael Moro said in the statement.
Spot desk traded more than $11.4 billion in volume, a notable drop from the prior quarter, amid declining volumes across the industry. However, spot customers were 15% skewed to the buy side, it said. Derivatives trading reached a record quarterly level with over $27.8 billion in notional value traded.
The company has seen “growing comfort” from traditional financial institutions and fintech firms to underwrite margin loans using Bitcoin as collateral, and observed “increased bank participation, triparty repo structures and syndicated, high yield issuances,” according to a quarterly report.
Institutions were also “slowly positioning” to take advantage of market inefficiencies in decentralized finance protocols over the first quarter, the company said. There is growing adoption of permissioned DeFi protocols — financial services executed by smart contracts rather than a centralized intermediary like banks, offered to approved users — such as Maple, TrueFi, Goldfinch and Clearpool.
“While institutional capital is willing to deploy to regulated crypto markets, unregulated areas such as DeFi remain underserved and inefficient. The next frontier of crypto yield inefficiency might converge to DeFi,” the report said.
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