Altcoin News: Chinese Cryptocurrency Companies and Funds Have Switched to the Lending Market

April 12, 2019, by Marko Vidrih on ALTCOIN MAGAZINE

Some cryptocurrency investment companies and funds from China have switched to the lending market, as it brings a steady income even in a bear market.

The number of new cryptocurrency lenders includes such well-known companies like Bixin Capital, FBG Capital, and DGrouр founded by Dong Zhao — the operator of one of the oldest over-the-counter sites in the region. The above companies, together with the Babelbank startup, have issued loans for $60 million over the past 5 months. Moreover, the lion’s share is cryptocurrency or, in one firm’s case, Chinese yuan which carries with it increased risks associated with regulatory issues.

Representatives of the companies reported that such services are especially popular among local retail investors, hedge fund traders and even cryptocurrency miners. The latter relies on the fact that the price of Bitcoin will rise over the next few months, so they borrow money in USDT, which is then transferred to the yuan.

“The demand for personal crypto loans doesn’t fluctuate that much regardless of market conditions,” said Xi Wang, head of financial markets at Bixin Capital. “So, in a bearish market, making profits from lending assets is relatively a much [more] stable bet.”

Bixin Capital opened a crypto-credit unit in November last year, noting a decline in activity in the investment area. Now the company has about $10 million in loans, which brings a few Bitcoins of net profit per month. The company provides loans in popular cryptocurrencies: BTC, ETH, EOS, LTC and USDT, requiring one of five assets as collateral. At the moment, the annual rate is about 7%.

The FBG Capital Fund has long been engaged in crypto-lending, but in the middle of last year decided to withdraw this area into a separate business. The amount of loans open to them today is about $15 million.

All of the above companies provide a slightly different service than traditional financial institutions.

“In a way, you can say it’s like a role shift, from investment banking and private equity to commercial banking,” said Wang. “It’s a must. Conventional bank loans are based on your education, credit scores, jobs, properties, etc. We don’t evaluate any of these. That’s why our risk control must be completely on collateral.”

Note that the field of crypto-lending is actively gaining momentum not only in China. For example, Mike Novogratz’s Foundation Galaxy Digital plans to raise up to $250 million to issue loans. At the beginning of March, the sponsored Galaxy Digital company BlockFi reported that in two weeks it had managed to attract $25 million in deposits from Bitcoin and broadcast from investors. These funds will be used to issue loans to large institutional clients.

Author: Marko Vidrih