Genesis Reports Downward Trend in BTC Demand as Institutions Prefer ETH, DeFi
It’s earnings reporting season, and third-quarter growth hasn’t gone so well for some companies directly engaged in cryptocurrencies. This is largely due to the wild price swings that Bitcoin has experienced in recent times.
For example, Microstrategy, the world’s largest Bitcoin holding company, has witnessed paper losses by holding the digital asset in its books. Payments giant Square also noted a drop in revenue and the gross margin generated by the cryptocurrency had declined quarter over quarter.
Top crypto broker Genesis, which recently released its third quarter earnings report, suffered a similar fate. Despite a record quarter in terms of market activity, its Bitcoin activity declined significantly during this period. Nonetheless, the company’s loan issuance reached $ 35.7 billion, up more than 586% year-on-year, while cash transactions were up more than 450% from the previous quarter.
How did the broker make this possible? By capitalizing on the rise in popularity noted by Ethereum and other L-1 altcoins due to the growing adoption of DeFi.
As Genesis’ lending office processed $ 35.7 billion in new creations, up from $ 25.0 billion in the second quarter, Bitcoin’s share of outstanding loans fell from 42.3% to 32, 4% during this period. The report deepened,
“While BTC loans have increased overall, the relative weight has continued to decline as demand responds to the shrinking base and GBTC haircut. “
ETH records strong growth in its loan portfolio
On the other hand, however, ETH loans “have experienced strong growth both in absolute terms and in relative weight, alongside increased demand from institutions seeking to engage with DeFi platforms.” As a result, the share of ETH’s loan portfolio fell from just 15.5% at the end of 2020 to 32% at the end of the third quarter of 2021.
In this sense, the report highlighted a continuing downward trend in demand for Bitcoin. While the company initially noted a decline in the inclusion of the Bitcoin portfolio in the first quarter “due to the relative lack of BTC-denominated trading opportunities, it noted a resumption of this trend in the third quarter” in due to the continued inversion of the GBTC premium and base flattening. curves. “
The report also adds that the “deleveraging of retail exchanges” like Binance and FTX has tipped the sector towards institutionalization, as “the opportunities for arbitrage in the spot and futures markets have diminished significantly.”
On the other hand, institutions have increased their appetite for ETH as a way to borrow and lend on DeFi platforms and earn high returns. While this was also accompanied by L1 alternatives to attract more developers and capital, according to the report, which added,
“As L1s compete for speed and security of transactions, incentive programs have catalyzed a storm of cross-chain activity, resulting in a shrinking market share of ETH in favor of L1s like Solana, Terra , Avalanche and Fantom. “
Due to the financial incentives and greater return options provided by DeFi protocols, crypto capital quickly migrated to their native tokens and threatening the Bitcoin hierarchy. The surge in the popularity of altcoins has caused Bitcoin’s dominance to drop significantly in recent months, hovering around 42% in recent days.