A shift from BTC to ETH are among the findings from digital currency brokerage Genesis’ Q2 2021 Market Observations Report.
Strong institutional growth continued throughout the quarter. Loan originations increased almost 700 per cent YoY to an all-time high of $25 billion in Q2 and were 60 per cent higher quarter-over-quarter. This marks the thirteenth consecutive quarter of growth.
BTC trading accounted for roughly 47 per cent of the platform’s overall spot trading activity, down from roughly 80 per cent in Q2 2020. ETH took most of that share from BTC with ETH accounting for roughly 25 per cent of overall volumes on the desk.
Continued demand for altcoins was also evident. With the outperformance of ETH over BTC in the first half of Q2, trading in UNI, SUSHI, AAVE and other Ethereum-based DeFi protocols picked up. There also was an increase in trading for ETH competitors like SOL and BNB as ETH gas prices skyrocketed during the market run-up.
“Trends both in Genesis’s activity and the broader market confirm the changing role of Bitcoin as the industry’s gateway asset, and highlight the emerging protagonism of Ethereum and decentralized finance,” said Matt Ballensweig, head of Institutional Lending at Genesis. “Bitcoin’s dominance in terms of market cap declined from over 70 per cent at the end of 2020 to under 45 per cent at the end of Q2, as Ether and most of the main decentralized finance tokens more than doubled in price from the beginning of the year.”
On the Genesis derivatives desk, the counterparty base grew by 15 per cent, mostly due to large macro discretionary hedge funds looking to enter the crypto derivatives market for the first time and setting up crypto products including DeFi exposure. The addition of institutional investors to the Genesis platform came as the firm continued to broaden its support for an increasingly diverse set of crypto assets.
In Q2 Genesis traded $29.2 billion in spot. That represents close to a five-fold in crease quarter on quarter but a bit lower than 1Q21’s volume. Even as BTC’s price fell 41 per cent during the quarter, total platform active outstanding loans decreased only 8.1 per cent to $8.3 billion.
Electronic execution rates rose from 32.5 per cent to beyond 42 per cent. Even as the overall market volume contracted by one third and the market cap dropped 20 per cent, Genesis trading volume only dropped seven per cent.
“The growing involvement of legacy financial institutions in crypto markets is making it impossible to ignore,“ Genesis CEO Michael Moro said. “Some barriers to entry still exist for institutional investors, which is likely why we’re seeing such increased demand for Genesis’s more accessible single point of access for the maturing digital asset market. The industry will continue to mature as we see a greater adoption of crypto assets and diversification within the space.”