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- Unchained Capital value zooms past $125 million after Series A funding from NYDIG
- Digital asset investments have grown significantly over the past year with lending/borrowing platforms created for a different use case in crypto
- DeFi is poised to grow its market and liquidity measures to attract new investors and traders on its platforms
Bitcoin’s price has moved from a little below $10,000 a year ago to $37,000 making it the most famous and valuable investment instrument across the globe. Moreover, if the price has increased significantly, its lending business should also not be left behind. An estimate pegs the loan amount to be around $3.7 billion on all DeFi platforms.
The open source algorithm based network of cryptocurrencies has attracted a lot of market participants and new entrants who took the dip. New York Digital Investment Group LLC (NYDIG) provided the lending capital of $25 million to Unchained Capital Inc, a New York based Bitcoin lender.
Bitcoin loans see massive potential
With the Series A funding coming from a subsidiary of Stone Ridge Asset Management fund, the company’s value zoomed to $125 million. Joe Kelly, the CEO of Unchained, stated that the company had received $50 million from NYDIG in February and the latest funding strengthens their relationship.
Unchained was founded in 2016 when the number of loans outstanding was pretty low. The annual run rate currently stands at $250 million after growing 5x over the past year itself. The total loan originations exceed $10 billion for the industry.
It is a massive hike to earn interest on cryptocurrencies at formidable rates. The annual transaction volume in the market is over and above $85 billion. Unchained provides a loan amount of 40% of the value of Bitcoin collateral posted with them. Furthermore, it charges 11% in fees for managing funds and collecting remuneration for multi-signature digital service that it provides.
New use case for crypto traders and investors
In a country where interest rates on savings accounts are trading near zero to ride out the pandemic wrath, crypto investors can put their investment as collateral with firms like Unchained and earn 10% APR interest. On the other side, borrowers receive cryptocurrency at 20-25% of the deposit value and stay alert for a rise in price.
Arbitrageurs buy and sell cryptocurrency on two different exchanges as their bets are not directional in nature. Investors can even go short on Bitcoin via the lending/borrowing process and stand to gain when the prices go south.There has been a subtle growth in assets dealing in altcoins and stablecoins. Early Bitcoin used to dominate 70% of the market which is reduced to less than 50% as cryptocurrencies like Ethereum, Ripple and Zcash have gained traction.
DeFi as a risk management tool
Decentralised Finance is being used to diversify investments across a different asset class and stabilise returns. The lending business on DeFi has boomed to the extent that new entrants have started to enter the market via suitable lending platforms.
The value locked in terms of USD in DeFi lending platforms stands at $667 million which is greater than the economies of a few countries combined. The entry of lending platforms have forced centralised finance institutions to reduce their margins due to cut-throat competition in the financial ecosystem.
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.
