Genesis said that the trend for Bitcoin demand has dropped as institutions switch to DeFi and Altcoin projects. Genesis’ Q3 report showed the growth of the crypto market despite the setbacks, but institutions turned to DeFi and altcoins instead of BTC. Cryptocoin. com, crypto firm Genesis recently released its Q3 Market Watch Report, highlighting some key trends in the market. This time around, it shows Bitcoin demand dwindling in the third quarter as institutions explore DeFi platforms and altcoins.
Altcoin projects are in the limelight
BTC demand is trending downwards due to institutionalization. According to the report, demand for BTC showed a downward trend in the 3rd quarter due to the lack of opportunities for traders to profit from the difference between BTC price in the spot and futures markets. The firm noted a “significant structural change” in the crypto market, starting with the lowering of the leverage of individual transactions. In Q2, we saw a few exchanges like Binance limiting their leverage offerings, lowering the levels to a maximum of 20x for accounts opened within 30 days. He tells the report: “In the first quarter of 2021, Genesis first recorded a significant drop in the weight of BTC in our overall portfolio due to the relative lack of BTC-denominated trading opportunities. While this paused in Q2, it resumed in Q3 due to continued GBTC premium inversion and flattening of fundamental curves. The report also noted that “lowering the leverage of individual transactions”, combined with China’s crackdown on crypto, has led to a shift towards institutionalization in the industry, making Bitcoin less attractive to opportunistic traders as a result.
The company emphasized that the number of institutions coming to the DeFi field has increased. The document reported a greater appetite in ETH for institutions to borrow and lend in various decentralized applications (DApps). Emerging Tier-1 protocols have also seen a surge in interest, with various crypto institutions exploring return opportunities (across L-1s that provide attractive rates for stablecoins and ETH/BTC pairs). This led to a price surge for altcoins, which continued to gain ground in the market throughout the third quarter. One of the top winners is Solana (SOL), who beat Cardano (ADA) after breaking the all-time record this week.
“Apart from greater interest in ETH loan originations during the quarter, altcoins – and L1 alternatives in particular – saw a surge in demand and served as natural liquidity pairs for DeFi yield opportunities,” the report says. Despite the lack of interest in Bitcoin, anticipation of the first US futures-linked Bitcoin ETF stimulated the market, with traditional financial institutions such as investment banks and $100 billion asset managers sparking strong interest in the product. In total, Genesis traded over $37 billion across derivatives and spotlights in the third quarter. BTC accounted for roughly 61% of Genesis’ OTC (over-the-counter) transaction activity, up 47% in Q2.