August 4, 2021
by Genesis Trading
Genesis, a digital asset industry pioneer and digital currency prime brokerage, today released its Q2 2021 Market Observations Report which highlights major trends across institutional digital asset markets. The report shows a significant rotation out of Bitcoin (BTC) into Ethereum (ETH) and explains how clients’ search for yield drove activity across Genesis throughout Q2.
Genesis continued to see significant growth in institutional interest throughout the quarter. The firm’s new loan originations increased almost 700% year-over-year to an all-time high of $25 billion in Q2 and were 60% higher quarter-over-quarter. This brings the cumulative originated value to $66 billion since the launch of the Genesis lending business in March 2018 and marks the thirteenth consecutive quarter of growth.
BTC trading accounted for roughly 47% of the firm’s overall spot trading activity, down from roughly 80% in Q2 2020. ETH took most of that share from BTC with ETH accounting for roughly 25% of overall volumes on the desk.
Genesis also saw continued demand for altcoins this quarter. With the outperformance of ETH over BTC in the first half of Q2, trading in UNI, SUSHI, AAVE and other Ethereum-based DeFi protocols picked up. Genesis also saw an increase in trading for some ETH competitors like SOL and BNB as ETH gas prices skyrocketed during the market run-up, which led investors to search for cheaper ways to participate in the ecosystem.
“Trends both in Genesis’s activity and the broader market confirm the changing role of bitcoin as the industry’s gateway asset, and highlight the emerging protagonism of Ethereum and decentralized finance,” said Matt Ballensweig, Head of Institutional Lending at Genesis. “Bitcoin’s dominance in terms of market cap declined from over 70% at the end of 2020 to under 45% at the end of Q2, as Ether and most of the main decentralized finance tokens more than doubled in price from the beginning of the year.”
On the Genesis derivatives desk, the counterparty base grew by 15%. This growth was largely driven by large macro discretionary hedge funds looking to enter the crypto derivatives market for the first time and setting up crypto products including decentralized finance (DeFi) exposure. The addition of institutional investors to the Genesis platform came as the firm continued to broaden its support for an increasingly diverse set of crypto assets.
Other key highlights from the company’s Q2 performance include:
- Genesis traded $29.2 billion in spot in Q2, a year-over-year increase of 487% quarter-over-quarter but slightly lower than Q1 2021’s volume during the bull run.
- Despite a 41% decline in the price of bitcoin over the quarter, Genesis’s total active loans outstanding decreased by only 8.1% quarter-over-quarter to $8.30 billion.
- The Genesis trading desk increased electronic execution from 32.5% of all trading activity to over 42%.
- Despite an overall market trading volume contraction of 33% and a market cap fall of 20% in Q2, the Genesis trading desk generated volume only 7% lower than Q1.
- Custody increased the number of onboarded entities by 22% quarter-over-quarter with 63% of Genesis Custody customers also having a trading and/or lending account with Genesis.
“The growing involvement of legacy financial institutions in crypto markets is making it impossible to ignore,“ said Michael Moro, CEO of Genesis. “Some barriers to entry still exist for institutional investors, which is likely why we’re seeing such increased demand for Genesis’s more accessible single point of access for the maturing digital asset market. The industry will continue to mature as we see a greater adoption of crypto assets and diversification within the space.”
Genesis Trading is a wholly owned subsidiary of Digital Currency Group (DCG). In addition to Genesis, DCG is the parent company of Grayscale Investments, the world’s largest digital currency asset manager; CoinDesk, a leading media and events company; Foundry, a financing and advisory company focused on digital asset mining and staking; and Luno, a digital asset exchange and wallet.