Bitcoin ETFs, Bankruptcy Paybacks Have Given Crypto Lending a Second Wind

Crypto lending firm Ledn survived the crypto winter by being "boring, slow and safe," according to a co-founder.
Crypto lending sector is making a comeback thanks to spot bitcoin ETFs and customers getting their assets back from bankrupt companies, Ledn's co-founder said.
Bitcoin's rally validated crypto holders' investment thesis.
The firm survived the crypto winter by being "boring, slow and safe."
The crypto lending sector is recovering from the crypto winter, which blew up several large players, thanks to spot bitcoin (BTC) exchange-traded funds (ETFs) and creditors getting some of their assets back from bankrupt companies.
"What I'm seeing is that this market has come back roaring," Mauricio Di Bartolomeo, co-founder of crypto lending firm Ledn, told CoinDesk during a recent interview at the Consensus 2024 conference in Austin, Texas. "The market never really left; it [just] got scared."
Crypto lending is akin to conventional banking. Customers deposit bitcoin or other cryptocurrencies with a company like Ledn, and earn interest or use that crypto to back loans. The interest paid to depositors is generated by lending their crypto to others and charging them interest.
The sector spectacularly imploded in 2022 as crypto prices dove, with firms including Celsius, BlockFi and Genesis filing for bankruptcy.
Since then, the digital assets sector has recovered from the bear market downturn. Prices have soared, with the CoinDesk 20 Index up more than 200% since the end of 2022. The rally kicked into high gear late last year after BlackRock and other conventional finance giants applied – successfully – to create bitcoin ETFs in the U.S. According to Ledn's Di Bartolomeo, the positive narrative surrounding these funds is one of the major reasons why users are back in the lending market.
"Bitcoin has gone up from $20,000 to $70,000 and has become the focus of the political race in the U.S.," he said. "So that means there's more interest, there is real product market for bitcoin as an asset and for bitcoin as a collateral for lending."
In fact, Ledn processed more than $690 million in loans in the first quarter, its most successful quarter since its inception in 2018. More than 84% of the processed loans were directed to institutional clients, as demand spiked after bitcoin ETFs were approved in January. Ledn only process loans in bitcoin, Ethereum's ether (ETH) and two stablecoins: USDC and USDT.
The institutions participating in this sector now are mostly market makers from both Wall Street and crypto-native companies. "These are the firms that are operating in the ETF markets as well as spot," Di Bartolomeo said. "Some have made their names in crypto, some in TradFi."
Bankruptcy paybacks.
Another reason users are returning to the lending market is that many of the firms that went bankrupt are starting to give users their money back. Many of them are now returning to the lending market, according to Di Bartolomeo.
When asked why this is the case, he explained that for most of these users, their investment thesis – if you hold them long enough, you will get an appreciation of wealth – has been playing out despite the market downturns. These users were "kneecapped" by some bad actors, but as they start to get their assets back, many of the "hardcore users" won't likely sell, he said. Di Bartolomeo added that this is when they turn to the lending market...
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