Genesis Trading says loan book tops $1 billion after short sellers ‘piled on with unprecedented size’

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Genesis Global Trading, a New York-based over-the-counter trading firm, said it has facilitated loans in digital currencies worth more than $1 billion, buoyed by an increase in funds betting against major cryptocurrencies.

At the end of 2018, the company’s loan book stood at $1.113 billion, up more than 100% since the end of the third quarter, with a spike in interest coming when bitcoin,














BTCUSD, +1.09%












 the best-known cryptocurrency, breached technical support, plummeting to multimonth lows.

“On Nov. 14, the price of BTC moved 16% in a single day, which jump-started a period of increased loan originations as short sellers piled on with unprecedented size. Many long-short hedge funds viewed breaking the $6,000 price floor as an accelerator through $5,000 and into the $4,000 range,” the company said.

Genesis Trading


Genesis Trading loan originations

Read: Winklevoss-founded crypto exchange Gemini secures critical third-party test of its security and design

In a short bet in the cash market, a trader must borrow the cryptocurrency and sell it, aiming to buy it back at a lower price. To borrow crypto, funds are required to post 120% of the sum as collateral, and depending on their strategy, an interest rate is determined. “For us, shorting is the riskier type of business so that will determine how much we lend and the terms of the loan,” said Michael Moro, chief executive of Genesis Global Trading in a phone interview.

Bitcoin remains the most popular cryptocurrency on the company’s loan book, accounting for 74.5% of the loan portfolio.

After a dip in the middle part of 2018, Ether














ETHUSD, +3.24%












 borrowing picked up toward the end of the year — possibly in anticipation of another move lower. “If ethereum crosses back below the $100 mark we could see short sellers pile into the currency,” said Moro.

Genesis Trading


Loan book composition

Contrary to popular opinion, Moro said short sellers didn’t initiate the lurch lower in digital currency prices but they tend to “deepen and prolong” any selloffs, adding that momentum plays a big part in short selling strategies, meaning that traders tend to wait for a confirmation of a downtrend before initiating their short bets.

Also, those expecting a reduction in short interest should crypto prices rebound could be in for a surprise says Moro, who said resistance levels on any rally would, at least initially, be met with selling interest. “I could see the $10k level [for bitcoin] being big resistance and short interest may pick up ahead of these level expecting the market to push back to the mid 9s,” said Moro.

Read: Why Bank Pros Remain Skeptical of Cryptocurrency

In a separate initiative, Genesis launched a fiat lending book where funds holding crypto can use it as collateral to borrow U.S. dollars, which to-date has been predominantly used to reach working capital requirements.

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Source : MTV