The CEO of BlockFi said the crypto lending platform is extending credit to miners at a time when competition for their business has eased because of the coronavirus crisis.
“We’re starting to establish relationships with miners for the first time now,” Zac Prince said. The reason: The market has lost some of its risk appetite, he said.
Previously, BlockFi couldn't win miners' business began the company’s competitors were willing to take bigger risks than BlockFi was comfortable with, Prince said. “Two months ago, lots of lenders were accepting miner equipment as collateral, and this isn’t happening anymore. Now, the risk tolerance on the market [has] declined.”
Like other lenders in this market, BlockFi makes fiat loans collateralized by cryptocurrencies, and vice versa.
Two other crypto lenders, Celsius and Nexo, said they did not accept specialized mining computers, known as ASICs, as collateral, but they are still lending to miners. A third, Genesis Capital, did not respond to a request for comment by press time, but CEO Michael Moro said on a recent podcast it had paused extending credit.
Taking mining machines as collateral is very risky indeed, said Nexo’s managing partner Antoni Trenchev. “It is rapidly diminishing in value and has to be stored somewhere, so I don't think it makes a whole lot of sense.”
Overall, despite the ebbs and flows of the crypto market, BlockFi’s business has been doing well this spring, Prince said. According to him, BlockFi saw its monthly revenue “more than double” since February, although he wouldn’t disclose the numbers.
More big borrowers
The set of institutional clients is growing as well, Prince said: Compared to some 60 institutions borrowing crypto from BlockFi in Q4 of 2019, about 90 are doing so now. Most of these lenders are market makers and proprietary trading firms.
One such client, Hong Kong-based fund Three Arrow Capital, joined the list of BlockFi’s investors recently, buying the shares from another investor, Able Partners.
In February, BlockFi closed a $30 million funding round lead by Peter Thiel’s Valar Ventures. One of the participants was Able Partners, which supported BlockFi as a company with a female co-founder (Flori Marquez).
Now Able Partners has decided to “recycle capital to support other early-stage founders, which is needed more than ever during these turbulent times," the fund’s partner Amanda Eilian said through a spokesperson.
In March, BlockFi added an option to deposit fiat on the platform, partnering with the crypto-friendly Silvergate Bank. When the client sends dollars to BlockFi, they get converted into stablecoins and stored this way on the platform, so that users can buy other cryptos with these stablecoins, Prince said.
A crypto trading option, added in December, has been quite popular, Prince said, and trading volumes, although modest compared to those at big exchanges, have been growing “by 3-5x every month,” he said.
The company is planning to expand its marketing reach for people who don’t own crypto yet, he said:
“If there has ever been a good time it’s now. Central banks are printing money on unprecedented level, the stock market is down. People are open to new things, and bitcoin is a compelling investing story.”
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