Digital asset prime brokerage Genesis has published its Q2 report sharing some interesting insight into crypto markets. According to Genesis, crypto lending declined while OTC trading rocketed higher.
- The lending desk originated $40.4 billion in new loans, a decline of 9% from the previous quarter.
- Genisis states that broaker market conditions contributed to a 66% drop in active loans outstanding to $4.9 billion from $14.6 billion in Q1.
- The spot desk traded over $17.2 billion OTC, an increase of over 51% quarter-over-quarter.
- The derivatives desk traded $26.6 billion in notional value, down 4% from Q1.
Bitcoin comprised 56% of the traded volume, higher than the 48% seen in the first quarter and reflective of the market’s risk aversion.
During the quarter, Genesis saw significant drawdowns as Genesis Custody processed its highest number of quarterly transactions, representing an 8% increase over Q1.
Of note is the fact that Genesis had exposure to Three Arrows Capital (3AC), a crypto hedge fund that went bust due to excessive leverage. Genesis was fortunate in that its parent firm, Digital Currency Group – assumed the losses by migrating the assets over to their balance sheet leaving Genesis free and clear of the debacle.
Another interesting point is that Genesis Asia Pacific Pte. Ltd. a subsidiary of Genesis, became one of a few Singapore-based digital payment token service providers to receive in-principle approval by the Monetary Authority of Singapore for a Major Payment Institution license. This bodes well for Genesis to serve the wider Southeast Asian market as Singapore remains a top Fintech hub.
The recent volatility and extreme decline in valuations has tested crypto markets having some call it the “Lehman Moment” according to Genesis. This led to fears of counterparty risk that could have a contagion effect. Genesis says there are reasons to be sanguine but further fallout could be a possibility. Somewhat similar to TradFi.