Genesis Global Trading has started a lending business called Genesis Capital to allow institutional investors to borrow cryptocurrencies.
Founded in 2004, Genesis Global Trading operates as a trading company that provides cryptocurrency trading services for institutions and individuals. It also offers auction-rate securities. As of July 2015, Genesis Global Trading, Inc. operates as a subsidiary of Digital Currency Group.
The company’s new lending business will allow investors and businesses to borrow cryptocurrencies in quantities of $100,000 or more for two weeks up to six months. Loans be issued in bitcoin, ether, Ethereum Classic, Litecoin, Ripple, Bitcoin Cash, Zcash and other cryptocurrencies.
Genesis Global Trading said in a press release that they believe that giving institutions the ability to both borrow and trade will expand their portfolio management and trading weaponry and encourage additional funds to enter the space.
“This will be the first time that institutional investors will get the opportunity to really borrow and hedge or short the digital currency spot market in size,” Genesis Capital CEO Michael Moro.
Genesis Global suggests that active hedge funds and other institutional investors can take advantage of this as a way to either hedge total portfolio risk or take speculative short positions. Managers looking to take long positions on the market holistically, but are particularly bearish on a specific asset, can short to hedge out the individual risk of that constituent.
“Firms trading bitcoin futures or options find it advantageous to have bitcoin on borrow because they can short-sell those borrowed bitcoin to delta-hedge their long derivative positions,” Genesis Global said. “Spot trading firms can utilize borrow as a way to leverage their existing trading strategies without taking on additional risk.”
Genesis Global also envisions other use cases for the service aside from portfolio management. One such example could be remittance companies that that need to make immediate settlements to their customers, but don’t want to buy a large balance of bitcoin and hold that risk on their books. The firm said they expect many different types of these use cases to emerge in addition to the obvious ones that exist today and plan to evolve their offerings along with the market.
Demand for this product has already brought Genesis Capital some noteworthy clients in the cryptocurency world, including BlockTower Capital, an Andreessen Horowitz-backed digital currency hedge fund, and and DV Chain, a crypto trading company.
“Genesis Capital is providing a valuable service to cryptomarkets via their lending business by facilitating shortselling,” Ari Paul, CIO of BlockTower Capital. “This enables more efficient price discovery and allows managers to hedge risk and establish long-short spread trades.”
“The majority of trading volume in several cryptocurrencies is denominated in bitcoin, which has created a need for a bitcoin lending market,” said Garrett See, DV Chain’s CEO. “We’re excited to see the continued growth of institutional interest in the asset class and we welcome the launch of Genesis Capital’s lending business.”
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