$100M+ in Margin Calls: Crypto Lenders Demand Collateral as Market Buckles

The budding market for cryptocurrency-backed loans met its first big stress test this week as bitcoin (BTC) dropped 40 percent and lenders demanded additional collateral from borrowers.

In the last day, Genesis Capital called an additional $100 million of collateral from its selective pool of about 40 clients, CEO Michael Moro said Friday afternoon. Rival Celsius Network–which lends to 225 institutions, making up up a loan book of $400 million to $600 million at any given time–has seen margin calls in the hundreds of millions, according to CEO Alex Mashinsky.

Meanwhile, Nexo’s co-founder Antoni Trenchev said some customers have repaid loans while it has liquidated other clients’ collateral, the equivalent of foreclosing on a home mortgage. And BlockFi reported in a blog post that it made margin calls on its dollar-denominated loan book, with some liquidations, but declined to comment further.

$100M+ in Margin Calls: Crypto Lenders Demand Collateral as Market Buckles

“As of five minutes ago, everyone who needed to post collateral has,” Moro said. “We’ve had zero liquidation events … What we have done to augment our lending is we have not made any additional loans in the last few days.”

In the past year, crypto lending activity has mushroomed, as some holders sought to earn a yield on their assets, others sought to raise cash without selling their coins and market makers borrowed to fill orders quickly. The phenomenon could potentially improve liquidity and price discovery for crypto assets but it also has introduced systemic risks. Read More...