Genesis Active Loans fell 66% in the second quarter

Genesis Active Loans fell 66% in the second quarter

New loans from Genesis' lending desk fell 9% in the second quarter of this year, the company said Wednesday, while active loans outstanding fell 66% compared to the same period last year.

Genesis launched the first over-the-counting Bitcoin trading desk in the US in 2013, enabling billions of dollars in monthly crypto trades, loans and transactions.

The company's active loans outstanding were $4.9 billion as of June 30, up from $14.6 billion at the end of the first quarter. The industry has been hit by challenging credit markets over the last three months.

U.S. dollars and equivalents accounted for nearly 54% of Genesis' loan book, up from 48% at the end of the first quarter, amid what the report called a "flight to quality."

Bitcoin now accounts for more on Genesis' book as BTC credit weight increased from 28.7% to 30.4% quarter over quarter. Ether's weighting shrank from 16% in the first quarter to 11.4% at the end of June, reflecting relative price underperformance from April to June.

Genesis' lending desk generated around $40.4 billion - a 9% decline from the previous quarter - as crypto lending fell sharply in recent months. Most of these borrowings occurred in April and May, when the collective crypto market cap collapsed by more than 40%, from $2.2 trillion to less than $1.3 trillion.

A Genesis spokesman declined to comment beyond the report.

Digital Currency Group absorbed Genesis losses

This year's second quarter will likely be remembered as "one of the most dramatic in the history of the crypto ecosystem," the report said.

Three Arrows Capital (3AC) first announced that it was facing possible bankruptcy in June following a $400 million liquidation. 3AC suffered a major blow with the collapse of Terra's stablecoin in May due to significant investments in the ecosystem's LUNA token.

Although Genesis had loan exposures to 3AC, Genesis parent company Digital Currency Group assumed liability for losses on those loans, the company noted in Wednesday's report.

Simon Jones CEO and co-founder of Voltz Labs, Blockworks said Genesis' declining loan numbers reflect what he called the "CeFi collapse" and macroeconomic factors. Centralized finance lender Celsius, for example, initiated bankruptcy proceedings last month after suspending withdrawals and transfers in June.

“Some of these lending companies are being pressured on both sides,” Jones said. “As they draw capital from traditional financing... interest rates go up, and then in DeFi the returns go down, which basically means the interest they can charge a borrower... goes down.”

Although Genesis' new loans and outstanding active loans declined, the company's cash desk traded approximately $17.2 billion in the second quarter - a 51% increase from the previous quarter. Its derivatives desk traded at $26.6 billion, down 4%.

Genesis Custody processed the highest number of quarterly transactions, up 8% from the first quarter. The company also saw a 20% increase in the number of depository customers during the period.

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