As
bitcoin
begins
another
ascent
upwards,
competition
among
existing
crypto
lenders
will
continue
apace.
That
means
more
innovation
in
lending
products
and
offerings,
as
new
market
entrants
from
traditional
finance
and
crypto
look
to
take
a
piece
of
this
high-demand
industry
as
well
as
risks.
Much
of
the
market
turmoil
during
the
last
bear
market
was
caused
by
bankruptcies
and
business
failures
of
overextended
or
otherwise
shady
crypto
lenders.
This
post
is
part
of
CoinDesk’s
“Crypto
2024”
predictions
package.
Mauricio
is
the
co-founder
of
Ledn.
But
the
rebirth
of
the
crypto
lending
market
will
also
bring
exciting
opportunities
for
end
users
and
investors
alike,
and
drive
continued
changes
to
the
digital
lending
ecosystem
as
we
currently
know
it.
Here
are
my
seven
key
things
to
consider
for
the
year
ahead:
Beware
the
rise
of
overnight
lenders
As
more
users
enter
the
space,
old
and
new
companies
alike
will
try
to
fill
the
void
left
by
now-defunct
crypto
lenders
like
Genesis,
Voyager,
BlockFi
and
Celsius.
They
will
try
to
sell
customers
the
same
promises
of
high
returns
with
little
transparency
or
risk
management,
as
previous
failed
lenders
did.
There
will
be
more
fly-by-night
opportunists
trying
to
enter
the
market
and
trying
to
capture
share.
As
prices
soar,
don’t
forget
to
ask
the
right
questions!
Was
the
lender
able
to
navigate
2022
without
hiccups?
Are
they
“new”
to
the
space?
Investors
should
carefully
understand
how
yield
is
generated,
demand
proof
that
the
lender
is
accounting
for
client
assets
properly,
and
closely
examine
their
risk
management
policies
and
track
records.
If
you’re
not
getting
clear
disclosures
or
answers
—
beware!
Volumes
will
concentrate
around
regulated
venues
Bitcoin
(BTC)
and
ether
(ETH)
spot
trading
and
derivatives
volumes
will
shift
from
unregulated
venues
to
regulated
ones.
Until
now,
a
material
share
of
the
trading
volume
in
crypto
was
processed
through
unregulated
platforms
that
many
times
did
not
conduct
KYC
know
your
customer
checks
like
decentralized
exchanges
and
P2P
markets.
With
the
introduction
of
regulatory
clarity
and
the
emergence
of
spot
bitcoin
ETFs,
a
lot
of
this
volume
will
now
shift
to
regulated
venues
as
traditional
finance
participants
get
the
necessary
clarity
to
become
active
in
these
markets.
See
also:
What’s
All
the
Fuss
About
Bitcoin
ETFs?
Said
differently,
spot
volume
will
move
from
decentralized
exchanges
like
Uniswap
to
venues
like
Coinbase
and
Kraken
while
derivatives
volumes
like
options
and
futures
will
move
from
overseas
exchanges
like
Binance
and
ByBit
to
the
Chicago
Mercantile
Exchange
and
the
New
York
Stock
Exchange
for
ETFs.
Arbitrage
opportunities
in
bitcoin
ETFs
The
approval
of
spot
bitcoin
ETFs
will
lead
to
a
massive
expansion
in
the
bitcoin
lending
markets,
as
traditional
finance
and
crypto
market-makers
alike
will
be
able
to
arbitrage
price
differences
between
various
investment
vehicles
as
well
as
spot
BTC
prices.
Until
recently,
some
of
the
larger
TradFi
market
makers
had
not
participated
in
crypto
or
bitcoin
because
the
arbitrage
opportunities
necessitated
them
getting
involved
in
unregulated
venues.
With
spot
bitcoin
ETFs
available
in
places
like
Nasdaq,
bitcoin
derivative
products
in
the
Chicago
Mercantile
Exchange
and
spot
bitcoin
in
regulated
exchanges
like
Coinbase
and
Kraken,
institutions
now
have
all
the
tools
they
need
to
make
markets.
They
will
need
one
more
thing
—
physical
bitcoin
inventory.
Those
of
us
who
actively
participate
in
the
bitcoin
lending
markets
are
already
starting
to
see
this
effect.
This
evolution
will
not
only
enhance
the
attractiveness
of
bitcoin
lending
as
an
investment
option,
but
also
legitimize
and
contribute
to
the
overall
stability
of
the
digital
asset
market.
The
comeback
of
crypto
debit
cards
We
are
likely
to
see
a
resurgence
of
crypto
debit
cards
thanks
to
increasing
regulatory
clarity
and
the
continued
efforts
of
reputable
and
well-established
industry
players.
Specifically,
Visa,
Mastercard
and
Circle
have
been
investing
relentlessly
in
solutions
that
are
increasingly
more
integrated
with
crypto
platforms
and
digital
assets.
These
solutions
blur
the
lines
between
digital
assets
and
traditional
payment
rails,
allowing
users
to
spend
their
holdings
directly
without
the
need
to
convert
into
fiat
currency.
Investors
will
demand
faster,
cheaper
transactions
As
the
bull
market
gains
momentum,
the
escalating
transaction
fees
will
likely
fuel
the
growth
of
layer
2
solutions
and
more
efficient
blockchains
(as
it
usually
does
during
bull
market
cycles).
Innovations
like
Lightning
Network
for
Bitcoin
and
scaling
solutions
like
Polygon
for
Ethereum
are
prime
examples
of
technologies
designed
to
enable
faster
and
cheaper
transactions.
High-throughput
blockchains
like
Tron
and
Solana
will
also
grow
in
popularity.
I
expect
these
ecosystems
to
mature
and
gain
wider
acceptance.
This
evolution
will
create
a
lot
of
opportunity
both
in
terms
of
future
product
innovation
and
investment.
The
growing
demand
for
stablecoins
The
stablecoin
market
will
grow
significantly,
I
project
that
the
total
supply
could
surpass
$250
billion.
Tether,
in
particular,
is
expected
to
maintain
dominance,
controlling
over
50%
of
the
market
share
due
to
its
widespread
adoption
across
the
globe.
The
growth
of
this
market
reflects
the
increasing
demand
for
digital
assets
that
combine
the
benefits
of
cryptocurrency
with
the
stability
of
the
U.S.
dollar.
Governments
will
try
to
compete
with
these
with
their
own
central
bank
digital
currencies,
but
I
don’t
expect
CDBCs
to
get
the
“warm
welcome”
governments
want.
Several
attempts
have
already
been
rejected
by
citizens
in
places
like
Nigeria
and
the
Bahamas,
and
I
expect
this
to
be
a
trend
that
continues.
Increased
DeFi
oversight
This
bull
cycle
will
be
markedly
different
from
its
predecessors,
primarily
due
to
the
anticipated
increase
in
oversight
in
previously
unregulated
markets
like
decentralized
exchanges
and
lending
platforms.
Financial
regulators
worldwide
are
fully
aware
of
the
growing
significance
and
volumes
flowing
through
platforms
that
do
not
know
who
their
customers
are.
Many
of
these
platforms
have
fully
centralized
operating
teams
and
will
fall
victim
to
regulatory
requirements.
In
practice,
all
of
this
will
result
in
authorities
making
an
example
from
a
few
DeFi
projects.
This
aggressive
stance
will
likely
create
“DeFi
martyrs”
who
will
bear
the
brunt
of
this
crackdown.
Once
these
nomially
“decentralized”
platforms
have
to
start
conducting
KYC
and
following
regulations,
the
volume
will
dry
up
by
moving
to
fully
regulated
venues
or
truly
unregulated
venues.
This
next
bull
run
is
not
just
about
financial
growth
and
innovation;
it’s
also
about
the
industry’s
maturation.
Block
by
block,
we
are
building
the
future
of
finance.
