A new research from cryptocurrency brokerage Genesis Trading explains how the market for crypto loans is being affected by a significant downturn in the cryptocurrency market. Genesis started $8.4 billion worth of loans in the third quarter of 2022, a decline of more than 80% in just three months.
The overall amount of active loans for the sector quarter in 2022 was $4.9 billion. During the final quarter of this year, this fell to $2.4 billion. The brokerage said that, despite the market sell-off, its loan desk was still operational. The industry's appetite for leverage, however, has significantly decreased as macroeconomic conditions have gotten worse.
The brokerage company has also seen a decrease in other areas of its operations. At Genesis, the spot trade volume plummeted by a startling 44% to $9.6 billion. Additionally, the $18.7 billion in notional value handled by its derivative desk was a 30% decrease from the prior quarter. The company's custody services companies, whose client signups increased by 8%, have been the lone bright light.
Genesis's Fourth Quarter Outlook
The outlook for the crypto company is not promising as we enter the fourth quarter. Genesis noted in its report:
“Heading into the fourth quarter, the cryptocurrency market is lacking directional momentum as participants are taking stock after a beleaguering summer of endless negative headlines, the company is prepared for a sustained crypto winter.”
When the cryptocurrency hedge fund Three Arrows Capital failed in June of this year, Genesis was among the largest debtors caught in the crossfire. The company, like other cryptocurrency businesses, had to make some difficult choices in order to streamline its operations.
Genesis completely reorganized its leadership team in 2022, along with 20% of its workers being let go. Over the past few months, some of its most senior officers, including recently appointed Chief Risk Officer Michael Patchen, left the company.
Despite Wall Street's recent boom, BigTech companies are plainly experiencing an industry slump. Future effects on the crypto space may result from this.