By far, Genesis' quarterly crypto reports are my favorite research pieces that track institutional adoption.
Last week, Genesis released their Q1 2022 Market Observations.
You know the drill, let's dive into some of the major takeaways.
In Q1 2022, Genesis originated more than $44 billion worth of loans, had $14.6 billion worth of active loans as of the end of Q1 (17% higher than Q4 2021 and 62% higher compared to Q1 2021), supported $27.8 billion worth of derivatives notional value (up 33%+ from Q4 2021), and had $11.4 billion worth of spot volume traded.
Furthermore, cumulative loans on Genesis reached $195 billion and assets under custody increased by 23% throughout Q1 2022.
The main takeaways from these numbers is that derivatives notional value outpaced spot volume by more than 2x, displaying that institutions in crypto are opting for derivative products more than spot.
As I mentioned before, one of the biggest takeaways in this report is the growth of Genesis' derivatives business despite derivatives volume being industry wide down for the quarter. Interestingly, $4.7 billion of the $27.8 billion worth of derivatives notional value traded, or 17%, came from altcoin derivatives. This number was the highest yet for Genesis, indicating that institutional interest is expanding beyond BTC. Another datapoint to support this point is that the Genesis derivatives desk traded 61 different assets in Q1 2022,
OTC Spot and Custody
While Genesis' derivatives business is growing, spot volume traded actually decreased 63% from $30.8 billion in Q4 2021 to $11.4 billion in Q1 2022. This decrease in volume likely stems from the bearish market environment.
The number of customers onboarded onto Genesis' custody product (previously called Volt) increased by 36% compared to Q4 2021. Genesis states that many of these new customers are large public and private mining companies, VC firms, and traditional asset managers.
Unsurprisingly, SOL, the favorite L1 of tradfi entrants, was Genesis Custody's largest asset increase for the quarter at 70%. Additionally, custodied BTC increased 46% while custodied USDC increased 62%.
While Genesis' increase of market share in the derivatives market is encouraging, its precipitous drop in spot volumes could be a problem. I personally attribute the drop more to the market environment than a loss of market share by Genesis, but it will be interesting to see what spot volumes do once market sentiment shifts.
Additionally, the fact that Genesis started with mining companies and VCs before acknowledging their conversion of tradfi asset managers to the space indicates that a more crypto native audience still dominates the institutional world.
In my opinion, we are years away from most of tradfi widely adopting crypto.
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