The crisis brought on by the coronavirus has been a shock to the entirety of the global economy. All around the world, every industry is scrambling to find ways to adjust to the new paradigm that was thrust into reality several weeks ago.
One of the most visible points of damage has been global financial markets. In just about every corner of the financial world, markets have cliff-dived, sending investors into a frenzy and forcing companies to build new strategies and contingency plans.
This has also been true in the cryptocurrency industry. While a great deal of Bitcoiners and other crypto enthusiasts believed that cryptocurrencies–especially Bitcoin–would act as a safe haven during times of crisis, so far, the opposite has proven to be true.
As such, every corner of the crypto industry has been affected in its own way–including the crypto lending sector.
Crypto lending has played a unique and increasingly powerful role in the crypto space over the last several years.
The sector has been lauded for staying profitable during some of the more beastly bear markets in recent history, including the doldrums that plagued crypto for most of 2018. In early 2019, Bloomberg explained that this was because of the sector’s dual appeal: to investors who need cash but don’t want to sell their coins when valuations are down, as well as investors who are interested in short-selling.
However, the current financial crisis that has plunged crypto markets into some of their lowest levels in months may have different implications than the bear markets that have previously engulfed crypto: this time, the downturn in crypto was (and is) coupled with a massive downturn in markets across the board.
How has the coronavirus crisis affected the crypto lending sector so far? And how will the sector be affected by the virus in the long-term?
” Crypto-backed lenders are likely faring better than other crypto businesses during the global pandemic.”
Alex Mashinsky, chief executive and founder of crypto lending firm Celsius, told Finance Magnates that he sees growth in his company’s future, though not as a direct result of the coronavirus: “we expect revenues to grow as a result of the volatility, not as a result of the outbreak;” he said. “We have been growing revenues steadily as we doubled our customers and deposits in the past few months.”
Similarly, Zac Prince, chief executive of crypto lending firm BlockFi, wrote on Twitter that “in extremely volatile markets, we generally see heightened activity across our product suite (trading, USD loans, crypto lending, and interest accounts).”
4/ We are fully capable of effectively operating our systems and processes remotely, if necessary. In extremely volatile markets, we generally see heightened activity across our product suite (trading, USD loans, crypto lending, and interest accounts).
— Zac Prince (@BlockFiZac) March 12, 2020
“Businesses with quality customer service and an empathetic support team have likely fared well, as they have been able to help clients manage stress and work through any issues stemming from market volatility, all while protecting their business,” he explained.
Indeed, if handled correctly, the anxiety surrounding the coronavirus and the market volatility could present an opportunity for companies to strengthen relationships with clients: “when businesses help customers when they need it most, customers remember the experience and it builds brand loyalty over the long term.”
“Similarly, those that have offered assurance to customers along with alternative tools and ways to take productive actions during this time to minimize frustration have fared best, given [the fact that] transparency and communication are essential, especially in times of crisis.”
How do you predict that the coronavirus will affect the crypto lending sector? What are the corporate strategies your company is using to survive the crisis? Let us know in the comments below.