Genesis report reveals institutions seek diversification of digital assets

Spoiler: Genesis had a blockbuster Q4. The expansion was noted across all business lines. Read on to find out the details and to see the industry's prospects.

Genesis, a prime US-based digital assets trading desk, revealed its quarterly Market Observations report recapping the company’s performance in the fourth quarter of 2021 and the whole year. Genesis is not about crypto trading only – it has a vast ecosystem opening access to spot and derivatives trading, digital assets lending, and custody services. Importantly, the broker’s clients are mostly qualified individuals and institutional investors. So, its report is sure to shed light on the preferences of large-scale crypto market players while also giving a good indication of future developments. 

Highlighting the key trends, the report reflects investors' promptness to diversify their digital asset investments while demonstrating an avid interest in DeFi coins. Also, Genesis noted that institutional investors took a deeper approach to participation in the crypto market. 

The report reflects Genesis performance from three angles:

• Loan originations and active loan outstanding.

• Spot and derivatives trading volumes.

• Demand for custody services.

Loan originations and active loan outstanding

The volume of both BTC and ETH lending decreased by the end of 2021 which was due to a correction in the cryptocurrencies’ rates. Bitcoin loans accounted for 42.8% in the first quarter, whereas in late 2021, the share was only 27.5%. Instead, investors opted for USD and equivalent loans that advanced to almost 40%. Meanwhile, DeFi 2.0 protocols experienced strong demand in Q4 as investors seeked greater flexibility and showed an increased willingness to go beyond conventional risk profiles.

Genesis Market Observations report for Q4 2021

Remarkably, Genesis reported an almost six-fold surge in loan originations in 4Q 2021 year-on-year. Compared to 2020, the yearly growth came in at a whopping 690%. Similarly, the outstanding loan portfolio in Q4 2021 climbed 227% from the end of 2020. The company’s experts attributed such a boost in activity to extremely optimistic sentiment fueled by the expectations of mainstream crypto adoption. 

The report also mentions an expansion of the NFT lending portfolio in the second half of 2021. Genesis provides loans backed by first-class NFT collaterals, though this offer has been most attractive to HNW individuals so far. Thus, Meta4 Capital, a firm purchasing rare and valuable NFTs, used the Genesis loan product to buy NFTs from the Natively Digital auction. The broker appears to be seeing tremendous potential in the NFTs and metaverse ecosystems since it actively develops NFT collateral products to meet institutional and mainstream market demand.

Spot and derivatives trading volumes ratchet up

According to the report, the derivatives trading volume reached another record high, jumping over 800% from a year ago. Specifically, these statistics relate to bilateral OTC products, exchange operations, and negotiated block trades. In December alone, the value of blocked BTC-ETH exchange-cleared options stood at over $1.5 billion. Seemingly, investors aimed to make a bundle when BTC/ETH was at its lowest levels of 2021. 

The fourth quarter was the busiest one for alt-coin derivatives. The total traded volume amounted to over $325 million.

Genesis Market Observations report for Q4 2021

Further on, BTC options open interest almost doubled in the fourth quarter amid a highly-anticipated approval of the bitcoin-related ETF in October 2021. In fact, this event pushed bitcoin prices to hit new record highs above $65K, with other cryptocurrencies trailing the upward trajectory. It fueled a rising interest from managers of diversified portfolios. Traditional investors fled to put their money in crypto futures, joining in the general bullish run. 

Genesis Market Observations report for Q4 2021 

Spot trades also saw robust activity in the fourth quarter, especially compared to the same period of 2020. The total trading volume advanced over 400% year on year. Diversification increased along with the volume. 

The number of traded assets more than doubled by the end of the year. In the third quarter, Bitcoin dominated portfolios with a 60% share, whereas in the fourth quarter this number declined to 48% of the spot volume. Similarly, Ethereum accounted for only 33% of the total volume. Among other traded digital assets Genesis noted SOL, LUNA, DOT, ATOM, ZEC, MANA, and LINK.

Custody services see higher demand

Likewise, custodial services recorded an increase. The number of clients who entrusted their digital funds to Genesis rose 53% in the three last months of 2021 compared to the previous quarter. As it happens, the increase was propped up by the FCA granting its approval to the broker. Aiming to raise the attractiveness of the service, Genesis started staking assets for clients. 

What’s next?

The fourth quarter of 2021 saw an avid interest in DeFi assets. Probably, the demand will remain strong in 2022 given the DEX ecosystems’ ability to ensure price rationalization and efficiency. Although Bitcoin is likely to remain the king of the hill, the market is becoming increasingly competitive with new strong trends hitting it continuously.

As outlined in the report, Genesis bets on the further adoption of the NFT venture funds by institutions. This is a reasonable assumption since NFTs have already gained wide acceptance among mainstream users as an efficient means of social promotion. 

NFTs might have been nominated for the most impressive breakthrough award if such a competition existed. According to DappRadar, the NFTs trading volume leaped to over $23 billion in 2021 from a mere $100 million a year before. Indeed, non-fungible tokens are penetrating all spheres of our lives, being used as pieces of art and an additional source of income for gamers. 

Final thoughts

The Q4 Market Observations report reveals a long-running upward tendency across all business lines of the company: from digital assets trading to loans and custody. Naturally, the crypto sphere came through crests and troughs in 2021, but the underlying trend remained strongly bullish. The increasing demand for NFTs venture funds from institutional investors opens up bright perspectives for this segment of the market. Another important fact to note is investors' aspiration to diversify their crypto portfolios with altcoins and embrace new trends. A shift in sentiment to more confidence in crypto amid its mainstream adoption paves the way for more growth to come.  The report is yet another proof of the galloping popularity of digital assets. 

Mike Ermolaev is the head of PR at ChangeNOW.io and an expert author at Forbes, BusinessInsider, CoinTelegraph, Investing.com, FXStreet and others. He has been working in crypto PR since 2018, being CCO at several prominent crypto entities and co-founder of his own communications agency before joining ChangeNOW’s team.

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