Crypto Lending May Be Booming Despite Market Recession

EU-licensed provider of crypto-loan products CoinLoan released a half-year report for 2022 that showed growth despite the ongoing crypto winter.

EU-licensed provider of crypto-loan products CoinLoan released a half-year report for 2022 that showed growth despite the ongoing crypto winter.

Growth in crypto winter

Q2 of 2022 was not easy for crypto businesses. Cryptocurrency lending companies, such as now-bankrupt Celsius, BlockFi, and Voyager Digital, announced suspending trading, deposits, and withdrawals, which sparked concern among investors. It’s estimated that investors have between 1 and 5 billion USD locked up in the hands of the struggling companies.

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With cryptocurrency prices falling to levels last seen in 2020 and the overall market cap declining by more than 1 trillion USD since the start of the year, the crypto lending sector is experiencing one of its worst crises in history.

While many crypto projects crashed amid the heightened market volatility, crypto loan and exchange services like CoinLoan managed to sustain growth through the market downturn.

According to the report released by the company, the platform experienced a 26% growth in wallet deposits, a 54% increase in interest rate deposits, and an uptick of 18% in exchange turnover. 

The report states that the company deliberately avoided having infamous LUNA and UST stablecoins in their portfolio, as well as participating in lending exposure to Three Arrows Capital. The company’s strategy may have helped sustain the stability of the business. 

Focus on Crypto Security

With expanding blockchain adoption and investment into crypto, strategies that ensure the security of the crypto assets are becoming critical for the industry to sustain growth. 

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Earlier this year, in June, the aforementioned CoinLoan partnered with crypto asset risk management and blockchain analytics firm Elliptic to detect money laundering and fraud transfers for their clients.

The partnership came after CoinLoan’s fraud detection team prevented what could have been a massive hack of the Trezor wallet caused by a data breach of a Mailchimp email newsletter service. 

Focus on security and stability could be differentiators between businesses that go under and those that make it through the crypto winter.  

Why Should You Care

Crypto lending has boomed over the past two years, along with the development of decentralized finance. The crypto loan market size estimated value in 2022 reached $7.04 billion. According to the research, the market is expected to grow at a compound annual growth rate of 25.9% from 2022 to 2030. 

Crypto loans caught the attention by offering low-interest rates compared to most credit cards and personal loans and the opportunity to earn passive revenue from assets.

On the Flipside

  • When the crisis shook the crypto industry, CoinLoan along with other crypto companies reduced the account withdrawal limit to balance the flows of funds and prevent liquidity-related interruptions. The company claimed it was a preemptive step to ensure smooth operation in the future. 
  • Deposits and loans are dependent on the volatile crypto market. Also, crypto loans are not overseen by financial regulators. For these reasons, crypto loans are inherently risky for both lenders and borrowers.

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
Paulina Okunyte

Paulina is a writer, reporter, and digital craftswoman. Her educational background extends from anthropology to IT & multimedia. She has experience working with tech startups, as well as mastering the craft of journalism. At DailyCoin, Paulina focuses on the world of metaverses, NFT marketplaces, NFT art, and blockchains backing NFT technology.