A bitcoin trading firm just opened up a lending business - and it's going gangbusters

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A man uses his phone as he walks past ATM machines for digital currency Bitcoin in Hong Kong on December 18, 2017.

  • Genesis Capital, a lending unit of crypto trader Genesis Trading, has already handed out close to $100 million in loans outstanding, a person familiar told Business Insider.
  • Crypto loans provide a way for bears to express their view in the market.

Bitcoin might be in a bit of a slump, but one brand new bitcoin business is going gangbusters.

Genesis Capital, the recently launched subsidiary of market making firm Genesis Trading, has close to $100 million in loans outstanding, a person familiar with the company's operations told Business Insider. That's a striking milestone, considering the business was launched two weeks ago.
Genesis Trading was one of the first trading firms to jump on the bitcoin bandwagon. The company spun-off from SecondMarket's cryptocurrency trading desk in 2015. The new lending business has attracted more than 60 clients, including market making firms and cryptocurrency hedge funds, the person said.

It gives out loans worth $100,000 or more in cryptocurrencies including bitcoin, ether, and bitcoin cash. BlockTower Capital, a cryptocurrency hedge fund, and DV Chain, a crypto trading firm, are some of Genesis' clients, according to people familiar with the matter.

Cryptocurrency loans can be an attractive product for numerous reasons. In particular, it's a mechanism by which cryptocurrency bears can bet against cryptocurrencies, especially those that lack their own derivatives markets.

"Hedge funds could borrow bitcoin to short it, for example," Lex Sokolin, a partner at Autonomous NEXT, the financial-technology analytics provider.

"This would mean they borrow some amount in bitcoin, sell it, and then repay in bitcoin (at whatever price) whenever the loan comes due."This is one way for cryptocurrency bears to express their view in the market. The breakneck growth of the market for cryptocurrency hedge funds could be behind the spike in demand for lending services, Sean Keegan, the founder of crypto hedge fund Digital Asset Strategies.

"If the only way to get involved in an asset is to get a long bet, you don't have people who are able to express their view," Keegan said in a phone interview. "It brings the market true value."

Autonomous NEXT estimates the number of crypto funds has increased to 226. That's up from approximately 50 at the end of August 2017. In total, they manage approximately $3.5 to $5 billion, a tiny fraction of the $3.2 trillion managed by traditional hedge funds.

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