Even though Bitcoin lending was one a prominent business model, the industry seems stuck in a rut. It is a business model which is hardly ever talked about in the open. The new report from GrayChain confirms things are still looking good despite some rather troublesome figures. How this industry will evolve over the years to come, is anybody’s guess.
Lifetime Metrics Look Promising
Numerous cryptocurrency lending platforms are active today. This list includes well-known names such as Ethlend, BlockFi, and SALT, among others. All of these companies combine for just over 240,000 lifetime loans, valued at $4.7bn. It is a very small market compared to traditional loans, but still a more than respectable figure. The reason for this popularity is not hard to find: cryptocurrencies are global, whereas traditional loans are active in smaller markets.
Moreover, the cryptocurrency industry allows users to be in charge of their loans. This applies to both the lender and the person receiving the funds. It is a business model which seems to promote financial inclusion. With multiple market participants trying to stake their claim, there appears to be a bright future ahead of Bitcoin lending as an industry. That being said, this momentum can easily swing in the other direction as well.
Annual Interest Rates Aren’t Great
Those users who expect to become rich by engaging in Bitcoin lending – as a lender – will be disappointed by this report. The estimated annual interest revenue is just $86m, or under 2%. It is not terrible by any means, but it won’t make too many people excited either. Even so, it is still better than some more traditional offerings in the financial sector. Everything needs to be put in its proper perspective at all times.
Liquidated Loans Need a Boost
When issuing a loan to someone, both parties agree on a specific time period to repay the funds. This is often referred to as a loan liquidation period. In Q2 of 2019, it seems nearly three times as many new loans were taken out compared to Q1. This may have to do with the overall rise in cryptocurrency prices, although that has not been officially confirmed at this point.
Of those loans issued in Q2, roughly one in eight has been liquidated so far. That is a nice increase compared to Q1, although the rise doesn’t match the increase in new loans. This shows users are lending a lot more money – 145% of the Q1 value – yet struggle to repay them quickly. That is not a promising send for [potential] lenders, as people want their money back quickly.
What Comes Next for Bitcoin Lending?
With all of the key figures showing a clear increase in cryptocurrency loans, the industry is still thriving. A lot will depend on how many of the outstanding loans are paid in full. One issue plaguing this industry is how loaned funds are not always paid back and often without real consequences. One can only hope these service providers ensure such issues will not arise for their customers in the future.
Disclaimer: This is not trading or investment advice. The above article is for entertainment and education purposes only. Please do your own research before purchasing or investing into any cryptocurrency or digital currency.