Crypto lending and borrowing markets have been severely impacted by the current bear market with volumes tanking by over 80%. The third quarter saw a couple of declines.
A convergence of macroeconomic cross-currents and narratives peculiar to cryptocurrencies occurred in the third quarter of 2022. This reduced volatility and increased correlations in the world of digital assets.
In stark contrast to popular perceptions of cryptocurrency’s high-beta personality, the total market capitalization of cryptocurrencies ended the quarter up a meager 4.6% at $905 billion, a far cry from its roughly $3 trillion peak in November of last year but a respectable showing during a period of stagnation.
The total active loans for the sector quarter in 2022 was $4.9 billion. During the final quarter of this year, this fell to $2.4 billion.
The brokerage said that its loan desk was still operational despite the market sell-off. However, the industry’s demand for debt has significantly decreased as macroeconomic conditions have worsened.
The brokerage company has also decreased in other areas of its operations. At Genesis, the spot trade volume plummeted by a startling 44% to $9.6 billion. Additionally, the $18.7 billion in notional value handled by its derivative desk was a 30% decrease from the prior quarter. The company’s custody services companies have been the only bright light, whose customer signups increased by 8%.
The company claims that while Q2 was difficult for the cryptocurrency market as a whole, Q3 was more dramatic for developed market inflation, resulting in G10 fixed income and FX. US 2-year rates skyrocketed to 5%, 10-year rates reached 4%, and the dollar soared to multi-decade highs versus the Yen and nearly parity with the British pound. Despite the FED’s (and other global central banks’) tightening of financial conditions, price pressures did not appreciably ease despite the massive tightening of liquidity.
As a result, the firm claims risk assets could not successfully emerge from the ashes. Rallies were brief, and there was frequently little sign of a permanent improvement in feeling.
When the cryptocurrency hedge fund Three Arrows Capital failed in June this year, Genesis was among the largest debtors caught in the crossfire. Like other cryptocurrency businesses, the company had to make some difficult choices to streamline its operations.
Genesis completely reorganized its leadership structure in 2022, with 20% of its workers being let go. Over the past several months, some senior officials, including recently appointed Chief Risk Officer Michael Patchen, left the company. Despite Wall Street’s recent boom, BigTech companies are experiencing an industry slump. Future effects on the crypto space may result from this.