• Contact Us
  • Privacy Policy
  • Live Exchange
  • LIVE ICO
  • Shop
Thursday, February 25, 2021
CryptoNewsking.com
Advertisement
  • Home
  • LIVE UPDATES
    • Live Coin Market Cap
    • Live Exchange
    • LIVE ICO
  • News
    • Crypto News
    • Bitcoin News
    • Ethereum News
    • Blockchain
    • Altcoin News
    • Exchanges News
    • Wallet News
    • Regulation
    • ICO
  • Guide Reviews
    • How to Buy Crypto
    • Bitcoin 101
    • Ethereum 101
    • Blockchain 101
    • Mining 101
    • Coins
    • Exchanges
    • Wallets
  • Market
  • Price Analysis
  • Business
  • Videos
  • Shop
No Result
View All Result
  • Home
  • LIVE UPDATES
    • Live Coin Market Cap
    • Live Exchange
    • LIVE ICO
  • News
    • Crypto News
    • Bitcoin News
    • Ethereum News
    • Blockchain
    • Altcoin News
    • Exchanges News
    • Wallet News
    • Regulation
    • ICO
  • Guide Reviews
    • How to Buy Crypto
    • Bitcoin 101
    • Ethereum 101
    • Blockchain 101
    • Mining 101
    • Coins
    • Exchanges
    • Wallets
  • Market
  • Price Analysis
  • Business
  • Videos
  • Shop
No Result
View All Result
CryptoNewsking.com
No Result
View All Result
Home Business

$60 Million and Rising: China’s Crypto Funds Try Lending to Beat Bear Market

04/15/2019
in Business
0
$60 Million and Rising: China’s Crypto Funds Try Lending to Beat Bear Market
190
SHARES
1.5k
VIEWS
Share on FacebookShare on Twitter

The Takeaway:

  • Crypto investment firms in China have turned to lending for a steady revenue stream to get through the bear market, including Bixin Capital, FBG Capital and Dong Zhao’s DGroup.
  • Each of these firms currently holds about $15 million worth of outstanding loans originated over the last five months.
  • Although most of these lenders don’t directly deal with Chinese yuan, they see borrowing demand domestically from retail investors, trading desks and cryptocurrency miners.

Several cryptocurrency investment firms and funds in China have turned to lending for a steady revenue stream to get through the bear market.

These new crypto lenders include such notable names as Bixin Capital, FBG Capital and DGroup, founded by Dong Zhao, who made a name by operating one of the longest-running over-the-counter (OTC) trading desks in China. Along with a startup called Babelbank, these investors have originated a combined $60 million worth of loans over the last five months, denominated in cryptocurrencies or, in one firm’s case, Chinese yuan.

Related articles

Jim Cramer thinks GameStop should convert their stores into crypto info centers

Jim Cramer thinks GameStop should convert their stores into crypto info centers

02/25/2021
Blockchain soccer gaming startup Sorare raises $50M

Blockchain soccer gaming startup Sorare raises $50M

02/25/2021

The demand, they say, comes mostly domestically, from retail investors, hedge fund traders, and perhaps most unexpectedly, cryptocurrency miners.

“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 launched its crypto lending business in November 2018 since activities on the investment side had slowed down, letting customers borrow bitcoin (BTC), ether, EOS, litecoin and tether (USDT) from its own reserve.

For the loans, the firm requires borrowers to put up one of the five supported assets as collateral, and charges an annualized interest rate of about seven percent.

Currently, it has an outstanding loan volume of around $10 million worth of the U.S dollar-pegged USDT, on which it is earning steady interest of “several BTC” per month, Wang said.

Similarly, Vincent Zhou, founder of FBG Capital, also said while his firm has long been involved in crypto loans, it didn’t formally launch a lending unit mid-2018, and now has about $15 million worth of cryptocurrencies as loan receivables.

Bixin, which started as a wallet and mining pool service in 2014, established Bixin Capital in 2017 to invest in cryptocurrency projects entirely with its own capital, without limited partners.

As such, lending is a different kind of investment than Bixin is used to, Wang acknowledged, telling CoinDesk:

“In a way, you can say it’s like a role shift, from investment banking and private equity to commercial banking.”

However, in one respect, this is much unlike bank lending.

Collateral, collateral, collateral

What makes crypto lending different from conventional bank loans is that the only risk control is strict enforcement of collateral requirements and forced liquidation, both Zhou and Wang said.

Wang added:

“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.”

For instance, he explained, for Bixin, depending on what crypto serves as collateral, the collateral rate could range between 70 to 75 percent. So if a customer can put up $100 worth of BTC as collateral, they can borrow about $70 worth in USDT.

In the case above, if the price of the BTC decreases to around $78, causing the collateral rate to go above the threshold of 95 percent, borrowers must either put in additional BTC to lower the rate, or Bixin will force-liquidate the held bitcoin at the current price.

Both Wang and Zhou said while their firms essentially play the role of a crypto bank, they are staying away from dealing with Chinese yuan.

Zhou told CoinDesk:

“There are lots of issues with lending Chinese yuan. One is that when we collect debts in fiat currency, it’s difficult for us to ensure that money is clean.”

Wang echoed that sentiment, adding that when Chinese yuan is involved in this context, it could lead to inquiries from law enforcement and could result in bank accounts being suspended.

But this vacuum presented an opportunity for Dong Zhao’s DGroup, which is operating its own crypto lending platform called RenRenbit.

Rather than acting as a lender itself, the firm serves as a consumer-to-consumer advertising platform to allow customers to borrow either Chinese yuan or crypto assets from third-party investors on the platform, with other types of assets held by RenRenbit as collateral.

Wei Wang, chief technology officer at RenRenbit, said in an interview that four months after the platform went live in November, it has facilitated $15 million to $20 million of loans, 60 percent of which are currently outstanding. And notably, that loan volume came from the pockets of just around 200 investors on its platform.

He added that prospective borrowers have the option to set a limit of the annualized interest that they will be charged, usually from 8 percent to 12 percent, and investors decide whether they want to lend the money.

Similarly, RenRenbit enforces a collateral rate that ranges from 65 percent to 85 percent, depending on what assets are pledged as collateral. The rate can be higher if the collateral is a more stable asset such as USDT, than say, bitcoin, Wang added.

And the company makes money by charging a 20 percent commission out of the profits or interest investors collect on each loan, he said. It has also rolled out automatic crypto investment plans to attract more newbies, through which investors deposit Chinese yuan regularly to the platform, which is then converted to various crypto assets based on different portfolio strategies. 

Who’s borrowing?

Stepping back, cryptocurrency lending appears to be gaining traction outside China as well.

For instance, Galaxy Digital, the cryptocurrency fund backed by billionaire investor Michael Novogratz, is aiming to raise a fund of $250 million for lending.

BlockFi, a crypto lender backed by Galaxy Digital, also claimed it gathered $25 million of bitcoin and ether deposits from investors in two weeks, promising an annualized six percent interest. It’s lending out those assets and charges institutional borrowers annual interest of 4.5 percent.

It’s easy to see why lending – along with staking of cryptocurrencies such as Tezos – is appealing right now, since these activities generate a return at a time when crypto prices have been in a slump (this week’s rally notwithstanding). But who is borrowing these assets, and why?

Bixin’s Wang said while the firm doesn’t require borrowers to disclose how they intend to use the loans (since its risk control solely relies on collateral), a significant portion of the demand comes from cryptocurrency miners in China who’d rather borrow USDT and liquidate that into Chinese yuan via OTC desks to pay for their electricity bills.

He explained:

“In a bearish market, miners are reluctant to liquidate their mining results when the price of bitcoin is at the lower end. When you’ve seen bitcoin was once traded at $20,000, you’d feel that’s a huge opportunity cost.”

Indeed, Beijing-based Babelbank, which started off as a crypto bank startup last September, said over 90 percent of its current $27 million outstanding loans are made to cryptocurrency miners in China, who are gearing up their capacity ahead of the water-abundant summer in the country.

Del Wang, co-founder of BabelBank, which raised $2 million in seed and angel rounds from ZhenFund, Lightspeed Partners and NEO Capital, told CoinDesk:

“As long as the ratio of electricity costs over mining results is lower than our collateral rate, a miner may never need to sell any bitcoin to pay utility bills – they borrow. And when a loan’s term matures, they just borrow another loan (to pay for previous loans).”

For miner borrowers, that’s simply a bet, hoping that bitcoin’s price will be higher in the coming months, reaching a point at which they are willing to sell.

The price for having that optionality of not paying mining costs out of their own pockets is they need to pay an annualized 8 percent to 12 percent in interest.

And aside from crypto miners, Bixin’s Wang said OTC and hedge fund traders in China are also strong forces in borrowing bitcoin, with USDT as collateral, so that they can build up basic trading positions without owning a more volatile asset.

“More interestingly, some are even borrowing USDT with bitcoin as collateral and then invest in China’s stock markets,” Wang said.

The SSE Composite Index, which is a market index of all stocks traded on the Shanghai Stock Exchange, has notably increased by nearly 30% this year.

This may present a dilemma of sorts for investors. Referring to the rally in yuan-denominated stocks, known in China as A-shares, Wang concluded:

“They certainly didn’t want to miss out on the opportunities in A-shares. But then, what if bitcoin can even outperform the stock markets?”

Bitcoin and Chinese yuan image via Shutterstock

Credit: Source link

Share76Tweet48

Related Posts

Jim Cramer thinks GameStop should convert their stores into crypto info centers

Jim Cramer thinks GameStop should convert their stores into crypto info centers

02/25/2021
0

With GameStop's stock more than doubling in price over the last two days, CNBC’s Jim Cramer is proposing the brick...

Blockchain soccer gaming startup Sorare raises $50M

Blockchain soccer gaming startup Sorare raises $50M

02/25/2021
0

Sorare, a major blockchain-based soccer gaming platform, has raised $50 million from high-profile investors backing major companies like Twitter, Instagram...

Arcade classic Street Fighter II launches NFTs on WAX blockchain

Arcade classic Street Fighter II launches NFTs on WAX blockchain

02/17/2021
0

Video game developer Capcom is the latest pop culture brand to enter the crypto collectibles space, launching a series of...

Axie Infinity escapes Ethereum gas fees as Ronin sidechain goes live

Axie Infinity escapes Ethereum gas fees as Ronin sidechain goes live

02/01/2021
0

Pokemon-inspired blockchain game Axie Infinity has announced that its long-touted Ethereum sidechain, Ronin, has gone live.Developer Sky Mavis developed the...

Fortnite founder says NFT tech “going places,” but currently “speculative mess”

Fortnite founder says NFT tech “going places,” but currently “speculative mess”

01/30/2021
0

Tim Sweeney, the co-founder of the studio behind titles such as Hitman, Gears of War, and the wildly popular Fortnite...

Load More
  • Trending
  • Comments
  • Latest

Bitcoin Holds $31,000 Ahead of Georgia Elections; What to Expect?

01/05/2021
Bitcoin Fractal Predicts a Return to $11,000 Is Imminent

Bitcoin Fractal Predicts a Return to $11,000 Is Imminent

10/04/2020

How JP Morgan’s Stock Strategy Could Translate To Big Money In Bitcoin

08/11/2020
ETH mining still highly profitable despite upcoming Eth2 upgrade

ETH mining still highly profitable despite upcoming Eth2 upgrade

02/24/2021

Exchange listings and NFT boom back Enjin’s (ENJ) 52% rally to a new high

02/25/2021
Altcoins bounce to new highs as Bitcoin price trades sideways under $50K

Altcoins bounce to new highs as Bitcoin price trades sideways under $50K

02/25/2021
$580M open interest makes Cardano (ADA) the third largest futures market

$580M open interest makes Cardano (ADA) the third largest futures market

02/25/2021
Soaring Treasury yields are worrying economists — But what does this mean for Bitcoin?

Soaring Treasury yields are worrying economists — But what does this mean for Bitcoin?

02/25/2021
CryptoNewsking.com

CryptoNewsKing.com is a curated world cryptocurrency news online portal which aims to provide the latest crypto and blockchain related news with real time updates from all around the world.

Donate

Do you like what we offer? Your donation can help us continue to improve the services we offer. Please send your donations to the addresses below. Thank you for your support and may the crypto force be with you.

BTC 

35RWoVxFbnmySWFHtYNV28rU4Hyf5TrTXD

ETH

0x1B35F874152c7d597029007f98f1F2361179034B

LTC

MJ3Cv9NXPt8ZM9x6mDiHGUFpm5yhiNntwT

Subscribe to get more!

  • Contact Us
  • Privacy Policy
  • Live Exchange
  • LIVE ICO
  • Shop

© 2019 CryptoNewsKing.com - All rights reserved

No Result
View All Result
  • Home
  • LIVE UPDATES
    • Live Coin Market Cap
    • Live Exchange
    • LIVE ICO
  • News
    • Crypto News
    • Bitcoin News
    • Ethereum News
    • Blockchain
    • Altcoin News
    • Exchanges News
    • Wallet News
    • Regulation
    • ICO
  • Guide Reviews
    • How to Buy Crypto
    • Bitcoin 101
    • Ethereum 101
    • Blockchain 101
    • Mining 101
    • Coins
    • Exchanges
    • Wallets
  • Market
  • Price Analysis
  • Business
  • Videos
  • Shop

© 2019 CryptoNewsKing.com - All rights reserved