The rise of the $5 billion crypto lending market and the fast approaching bubble


  • The potential bubble of crypto-lending business could go unnoticed by the wider financial market.
  • Lack of regulation, fewer borrowers and the high risk of taking fuel the path towards a possible bust.

According to a group of former Wall Street traders, the crypto lending market is growing at an overwhelming rate. The new market is approaching a cap of $5 billion after only two years of existence. The growth is characterized by the mushrooming of loan platforms as per the data provided by Graychain Ltd.

The picture displayed by the traders is similar to some scenarios in traditional finance such as the lax lending standards. Such a scenario is characterized by few borrowers and a high risk of taking. At the same time, the outstanding is too weak to cause ripples in the larger financial world. Moreover, this shows that new technologies have no other way but to conform to traditional markets' boom and bust cycles.

“What keeps me up at night is not adoption, or even regulatory uncertainty: it’s credit risk,” Jason Urban, a former trader at DRW Holdings LLC and Goldman Sachs Group Inc. told Bloomberg. He added, “The torpedo below the waterline is an MF Global-Lehman Brothers type event.”

According to Mathieu Jobbe Duval, a designer for CoinList crypto-lending platform that will help blockchain companies raise funds:

“Crypto is still a small market relative to traditional asset classes, however, the feeling of deja-vu is there: lack of regulation, cheap credit available with minimal due-diligence, and broad optimism.”

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