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Cryptocurrencies have been struggling with their prices for over a year now. Ever since falling from their peaks in January 2018, Bitcoin and other cryptocurrencies never even came close to recovering their lost value. In fact, cryptocurrencies, in general, have seen a discouraging investor enthusiasm, continuously losing their value throughout 2018 instead of making progress. Many crypto-associated businesses have packed up their operations or are looking to cut staff in order to make ends meet. However, those in the business of crypto-based lending don’t seem to have any complaints with the bear market.
Creditors say that the demand comes from both sides of the market. From borrowers who believe cryptocurrencies will regain their lost heights and do not want to sell at the lowered prices as well as investors who are looking to borrow digital coins and short sell to further drive down the prices.
The lending business initially rose in 2017 for a way to borrow cash without having to sell your Bitcoin and other virtual coin stashes. After the crash of 2018, lenders faced a new demand in the market with growth was even greater than before. Michael Moro is the chief executive officer of Genesis Capital. He said, “The bear market has certainly helped — at least has fueled the growth.” Genesis has already issued $700 million of loans since their launch in March 2018. Because of the growing business, Genesis is looking to increase their staff and focus on other regions such as Asia.
Lending companies usually require submission of collateral when lending to their customers. When collateral drops in value, customers face margin calls. Genesis says that they warn their customers beforehand if their holdings are about to be sold off. Mr. Moro said that at Genesis, borrowers receive margin calls if the price of the crypto collateral falls by 35 to 60 percent from the time of the loan grant.
With the rates of cryptocurrencies still facing fears of more price drops, crypto-based lending is perhaps the only exception to the rule that will continue to profit and thrive. However, experts say that it is not yet time to put your tinfoil hats on and say that crypto is about to end. Apple Inc. lost an amount of $55 billion this week after reporting lowered sales in China among other factors. That is nearly the total market cap of Bitcoin. This shows that the crypto market is still in its infancy.
There is a lot of time for it to mature and find its place in the mainstream industry and that current disappointing prices should be seen as simply part of a cycle that will eventually make cryptocurrencies stable and less fluid.