Lendingblock’s Study Reveals Increased Institutional Desire to Borrow and Lend Digital Assets, with 68% Seeking Out Stable Coins
A new research report by Lendingblock finds that lending supply and borrowing demand not only remains strong, but is growing amongst the top crypto hedge funds, exchanges, market makers, and trading houses around the world. The opinions are likely correlated to calmer markets and a less bearish momentum that is likely linked to what seems to be a positive broader market outlook.
The report, which was released on Wednesday, May 8, 2019, examined the borrowing and lending needs of leading crypto institutions between January and April 2019.
41% of the institutions sampled stated that they would expect to be making more than five loans at any one time. And, more than 50% showed their demand for borrowing to be higher than lending. 82% of firms expect to be taking at least one loan out at any given time, and of those, 30% having more than five.
Steve Swain, CEO of Lendingblock says, “when our clients borrow, they are borrowing for very specific purposes, such as to access working capital, to hedge a portfolio or to execute a short sell; when our clients lend, they are happy to lend out multiple loans for longer periods of time as their goal is generate yield on their passive investments. As the results show borrowing demand is strong, this indicates healthy returns for lenders given rates are set by market equilibrium on the Lendingblock exchange.”
The report identifies that borrowing digital assets is increasingly driven by working capital requirements rather than purely for short selling, which has historically been the primary driver for borrowing. “Firms are now relying on digital assets for short-term capital needs versus a borrow to short. This data tells us that the trend is shifting to reflect a reliance on and belief in crypto to support business’ every day operations rather than on betting in the short term that the asset drops in value,” Kelly Pettersen, Head of Business Development and Marketing, Lendingblock.
Meanwhile, there is substantial interest to increase the use of stable coins entering into the lending market, specifically US-backed stable coins that institutions can use for both principal and collateral. 68% of firms reported this; 64% of respondents said that they want to use stable coins as collateral when they enter into a borrow.
Steve Swain, “stable coins would give institutions exposure to the US dollar and provide some stability and endurance from the existing financial system. We believe these are the types of advances that the industry needs to build out the lending infrastructure that we know is already such a critical component in mature capital markets.”
The survey provided further insight into client behaviour. 50% of institutional participants expect to be lending or borrowing between $1 million and $5 million equivalent at any point, while 25% of respondents expect to be lending or borrowing between $5 million and $10 million and 25% above $10 million. BTC and ETH remain the top two digital assets that clients are interested in borrowing and lending, with lower but still material interest in other assets including BCH, LTC, and XRP. Lending supply is biased towards loans of 30 days or longer, whereas borrowing demand is spread more evenly across loan terms with interest in 1, 7, 14 and 30 days borrowing.