It’s earnings reporting season, and third-quarter growth hasn’t gone so well for some companies directly engaged in cryptocurrencies. This has been largely thanks to the wild price fluctuations Bitcoin has experienced lately.
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 decline in revenue and gross profit generated from the cryptocurrency had declined on a quarter-over-quarter basis.
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. Nevertheless, the company’s loan originations reached $35.7 billion, up over 586% year-on-year, while spot trading grew over 450% compared to the previous quarter.
How did the broker make this possible? By capitalizing on the rise seen by Ethereum and other L-1 altcoins due to the growing adoption of DeFi.
While Genesis’ lending desk handled $35.7 billion in new originations, up from $25.0 billion in Q2, Bitcoin’s share of outstanding loans dropped from 42.3% to 32.4% during this time. The report further elaborated,
“While BTC loans have increased overall, the relative weight has continued to decline as demand responds to the shrinking base and GBTC haircut. “
ETH sees strong loan book growth
On the flip side, however, ETH loans “saw strong growth both in absolute terms and in relative weighting alongside greater demand from institutions looking 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 that sense, the report highlighted a continued downtrend in the 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 added that the “deleveraging of retail exchanges” like Binance and FTX has shifted the industry towards institutionalization, as “opportunities to arbitrage the spot and futures markets have declined 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. Albeit, this has also been accompanied by L1 alternatives to attract more developers and capital, according to the report, which added,
“As L1s compete on 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. “
Owing to the greater financial incentives and yield options provided by DeFi protocols, crypto capital has swiftly been migrating to their native tokens and threatening Bitcoin’s 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.
