Genesis Trading, a leading global crypto brokerage firm reported an 80% plunge in its lending segment, taking the third consecutive beating in Q3 following the sharp decline in the digital asset market this year.
According to a report published on Friday, the New York-based entity’s total active loans slumped to $2.8 billion in Q3 down from $4.9 billion in the previous quarter. In Q1, the firm’s loans topped at circa $8.4 billion, as per the firm’s quarterly earnings report.
Most of its other businesses also declined substantially, with spot volume across 100+ assets plunging 44% to $9.6 billion. Its derivatives desk traded $18.7 in notional value, down 30% from its previous quarter. However, despite the hole in its balance sheet, Genesis custody services saw an increase in client signups, up 8% from Q2 and 280% YOY.
The drop in lending comes on the heels of a wider crypto market drawdown caused by a confluence of macroeconomic crosscurrents and crypto-specific narratives sapping volatility in the digital asset space. In the past two quarters, the total crypto market capitalization has dropped to $967 billion, a far cry from its $3 trillion peak In November 2021. Several crypto lending firms such as Voyager Digital and Celsius have also been forced to file for bankruptcy due to liquidity crisis in the past quarter with the likes of Blockfi facing the likelihood of buyouts.
In July Genesis CEO Michael Moro revealed that cash-beleaguered crypto firm Three Arrows Capital was the large counterparty that failed to meet large margin calls in June, forcing the liquidation of about $2.4 billion worth of undercollateralized loans. In August, Genesis announced that it would slash 20% of 260 employees which would also see CEO Moro exit.
Nevertheless, Genesis indicated that “the consolidation in cryptocurrency prices has allowed it to continue its diligent navigation of the crypto winter” adding that heading into the fourth quarter, the company is “prepared for a sustained crypto winter.”
“Conditions remained formidable against a backdrop of cataclysmic dislocations in developed market rates and inflation, which jarred risk sentiment in most asset classes. Yet there were also unique opportunities over the quarter, including the highly anticipated Ethereum Merge, which catalyzed paradigm shifts in market structure,” Genesis wrote.