Cryptocurrency lending has exploded over the past few years, and it now represents a $5 bln industry.
According to a Bloomberg report, which cites "a group of former Wall Street traders," this growth might be way too quick, which instills fear of another bubble.
The quick rise of crypto lending was propelled by the great Bitcoin crash that took place in 2018. Instead of selling or holding their coins at lower prices, many wanted to earn interest on their not-so-valuable coins and lend them out.
BlockFi CEO Zac Prince says that their business, which is backed by Galaxy Digital boss Mike Novogratz, is doing great without any late payments or losses.
Genesis Capital, one of the jewels in the crown of Barry Silbert's Digital Currency Group, has originated more than $3.2 bln in crypto and cash loans since March 2018. Genesis Capital's launch had incredibly good timing given that it managed to capitalize on a year-long bear market.
CEO of Genesis Capital and Genesis Trading Michael Moro claims that market participants should understand the risks in the crypto lending sector.
“Whether folks understand risk is where the scariness comes in. I see more competition and that leads to prices that don’t make sense relative to the risk and collateralization," Moro told Bloomberg.
Back in September, Ethereum co-founder Vitakil Buterin claimed that decentralized finance (DeFi) products shouldn't be treated as a safe investment.
As reported by U.Today, Malta-based cryptocurrency exchange also recently ventured into crypto lending by allowing its users to earn interest on three coins, which shows that this niche market is becoming very crowded.