A popular cryptocurrency lender has revealed that it processed over a billion dollars’ worth of cryptocurrency loans in 12 months.
70% of Loans Processed in 2 Months
According to the cryptocurrency lender, dYdX, the company has given out a total of $1.14 billion in digital asset loans over the past year. However, more than 70% of the loans were requested and processed in the last two months as the coronavirus pandemic affected the prices of the financial markets and cryptocurrencies and triggered borrowing amongst investors.
The data from dYdX shows that monthly loan volume remained below $100 million for nine months, up to January 2020. However, between February and March this year, the volume surged to around $300 million and $400 million, respectively. To top it off, less than $100 million has been borrowed so far in April, indicating a sharp decline in the appetite to borrow by investors.
The prices of Bitcoin and other cryptos fell sharply in February and March as the COVID-19-induced lockdown around the world led to a market crash. Bitcoin, which was closing in on $10,000, dropped to the $6,000 mark but has since recovered to now trade above the $7,500 mark. Ethereum, dominant crypto in the market, also dropped below the $100 mark, but it is currently trading around the $180 region.
dYdX further showed that roughly 45% of their total loan portfolio, which is around $516.64 million, is denominated in ETH. Also, around 33% or $378.67 million of the sum comprised of Dai loans, also a cryptocurrency. USDC, a stablecoin, accounted for the remaining $128.08 million of the loans obtained from dYdX.
Despite the details it provided, dYdX, which is a decentralized margin trading exchange, did not give insight into the type of borrowers it has loaned its money to or how they used the funds. However, with the current market situation, traders might be borrowing to hedge derivative investments or bet on the direction of some digital currencies.
Coronavirus Market Volatility
The founder of dYdX, Antonio Juliano, revealed that traders were rushing to use his margin trading platform as coronavirus volatility reached a peak level. However, the rush has since declined as the volatility of cryptocurrencies has slowed down in recent weeks, Juliano added.
The cryptocurrency market is not the only financial market that has been affected by the coronavirus pandemic. All over the world, stock markets, the forex market, commodities, and other financial asset trading markets have been negatively affected by the epidemic. The lockdown policies put in place by world leaders have drastically changed economic activities around the world, and this has led to the financial markets losing trillions of dollars within a few months.
It is unclear how long the lockdown policies will last and when countries plan to reopen their economies again. However, the longer the lockdown lasts, the more impact it will have on the financial markets.
dYdX is a decentralized exchange that focuses on providing margin trading services. The platform operates on the Ethereum blockchain, allowing users to borrow, lend, or trade three cryptocurrencies (Ether, Dai, and USDC). They offer leverage of up to 4x on dYdX. In recent years, cryptocurrency loans are increasingly becoming a viable alternative for people, especially for those in the crypto space, as they move away from borrowing fiat.