It’s earnings season and some of the companies directly involved in crypto didn’t see that much growth in the third quarter. This is mainly due to the recent wild movement in the price of Bitcoin.

BTC price 4-hour chart | Source: Tradingview

For example, Microstrategy, the world’s largest Bitcoin holder, has seen paper losses due to its holdings of digital assets. Payment giant Square also saw a drop in revenue and a drop in gross profit generated with crypto compared to the previous quarter.

Leading crypto broker Genesis suffered a similar fate, according to its earnings report for the third quarter. Despite record market activity during the quarter, their Bitcoin business declined significantly during that time. In contrast, corporate loans were $ 35.7 billion, up more than 586% year-over-year, while spot trading rose more than 450% qoq.

As such, the company has successfully benefited from the growing popularity of ETH and other Layer 1 altcoins as DeFi continues to be widely used.

While Genesis’s credit division totaled 35.7 billion in new loans, the report said:

“Overall, BTC lending increased, but the relative proportions continued to decline as demand responded to tightening spreads and increased GBTC haircuts.”

ETH is growing strongly in the credit sector

ETH loans, on the other hand, “are growing rapidly both in absolute numbers and in relative weights, combined with higher demand from institutions that want to join the DeFi platform”. As a result, ETH’s market share in the lending business increased from just 15.5% at the end of 2020 to 32% at the end of the third quarter of 2021.

With that in mind, the report highlighted the ongoing downward trend in Bitcoin demand. While the company first saw a decline in its Bitcoin portfolio in the first quarter, “due to the relative lack of trading opportunities in BTC, it now finds that trend will continue into the third quarter,” as GBTC arbitrage continues to invert and the Arbitrage curve is flattened.

The report also added that “retail exchanges like Binance and FTX De-Leverage” are shifting the industry towards institutionalization due to “opportunities for arbitrage in the spot and case markets”.

On the flip side, institutions are increasing the demand for ETH as a vehicle to borrow money, lend on DeFi platforms, and generate high returns. However, other Layer 1 alternatives are also very profitable for attracting more developers and capital.

“While layer 1 blockchains competed for transaction speed and security, several incentive programs catalyzed the storm of cross-chain activity and led to ETH’s market share shifting to other layers 1 such as Solana, Terra, Avalanche and Fantom.”

Due to greater financial incentives and high return options from DeFi protocols, the capital flowing into cryptocurrencies quickly shifted to their native tokens, threatening Bitcoin’s dominant position. Altcoins have skyrocketed in popularity, which has resulted in Bitcoin’s dominance rate plummeting in the past few months to nearly 43% in the past few days.

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Minh Anh

According to AMBCrypto

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