BlockFi’s recent $250 million bailout raises questions about how a more conservative lending approach might ripple across the market more broadly.Facing a liquidity crisis, this week crypto lending platformthat it signed a term sheet with FTX to provide a $250 million revolving line of credit, which will be used to bolster its balance sheet and provide liquidity across all account types.
A client of BlockFi’s institutional business told The Block that BlockFi representatives say that it will be “highly conservative” going forward, meaning that they might halt lending or slow down originations. Lending platforms make money by lending out customer funds and collecting a share of the payment, or by investing the funds in other market opportunities. Because borrower demand is not consistent, however, especially during bear markets, some say that the business model is unsustainable.
According to Laura Vidiella, vice president of business development and strategy at LedgerPrime, a crypto derivatives market maker, things are getting more expensive at every level of the market. To get loans, customers are having to put down collateral worth more than the loan itself. “There’s no debt right now being issued with collateral less than 110% where before we were getting 0% to 50%,” Vidiella told The Block.
Vidiella agrees. She said that one result of this market cycle is likely to be a consolidation of standards, from collateral requirements to how the health of a fund is verified.
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