Cryptocurrency creditors have been able to find profits from selling to two types of borrowers: die-hard crypto believers— who expect the market to rebound strongly and institutional investors—who need to get digital assets for short selling.
The downturn in the crypto market that saw cryptocurrencies lose more than half of their values have continued into the new year. Since the crash started in November, the number of blockchain companies restructuring their operations has increased as companies devise new methods to survive the bear market.
In the last three months, we have witnessed a litany of blockchain companies forced to shut down operations and in some cases, layoff team members to stay afloat. In spite of this mild depression, crypto lending has continued to thrive regardless, according to a Bloomberg report.
Crypto lending went mainstream in 2017. Lenders offered a way for bitcoin enthusiasts to borrow money using their digital assets as collateral. However, while it was widely believed that the niche's growth would slow down with the prevalence of the slump in crypto prices, lenders have been able to pivot and adjust to the market conditions.
The result? Continued expansion and profits, even while the rest of the crypto industry struggles.
For instance, BlockFi, a lending firm that got an initial $2.5 million investment from Mike Novogratz’ Galaxy Digital, has reported a 10-fold increase in customers and revenues since June 2018. BlockFi started by developing a USD-based crypto loaning fund that enabled holders of Ether and Bitcoin to borrow money, while using their digital assets as collateral. Seeing the potential of the crypto industry to grow, the developers saw an avenue to make even more money by providing flexible structures, affordable interest rates and high levels of fund security.
The bear market might have reduced the value of most of these assets, but lenders (especially the first class of lenders discussed above) have continued to flood the BlockFi service. As a testament to investor belief in its business model, BlockFi has raised more rounds from investors such as Akuna Capital and Morgan Creek Digital. The company has also expanded its services to 42 states across the U.S.
In the same manner, SALT, another crypto lending firm, has recorded massive growth in its operations. The company, which was formed in June 2017, claims to have a customer base of over 70,000 borrowers, while also issuing well over $50 million since it launched its services. A year after its inception, the company got approval to expand its services to 20 additional location, bringing its total haul to 35 states in the country. According to CEO Bill Sinclair, the company is looking at expanding its operations to all 50 states by the end of 2019.
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