How to unlock ‘massive potential’ as crypto lending comes back

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At Empire, we recently covered momentum investing strategies in crypto. Speaking of momentum…Empire’s Jason Yanowitz spoke to Carson Cook and James Roth of Membrane Labs for this week’s podcast. 

The three delved deep into what went wrong with crypto lending last cycle (shocker: a lot), and gave their thoughts on lending this cycle.

Putting aside the bad from the last cycle, Yanowitz asked if we might see something akin to the numbers that companies like Genesis were putting out (for example: half a billion in loan originations way back in the fourth quarter of 2021). 

Roth seemed to think so…as long as the markets behave.

“ I do think that, over time, you’ll have more and more money coming in, more and more safety being provided to folks around how they lend… and more providers stepping in like custodians, et cetera,” he said. 

But what really made me perk up — and perhaps this is because I just wrote about it — was Cook’s response, which is that it’s a momentum-driven game in crypto and not a fundamentals game…yet.

 ”As soon as markets go in one direction, the demand for leverage and lending exacerbates those moves. So they’re sort of the flywheel connects…As James was saying, if it gets going on the price movement side, you’re going to see a lot…I think you could blow through those numbers,” Cook said. 

The biggest way to grow the lending and credit parts of the market is through custodians, Cook continued. That’s how you unlock “massive potential” and encourage folks to move out of qualified custody or their cold wallets into the market. 

We’re still early here, and the medium to longer-term issue is not necessarily the markets (though they’ll always have an impact). It goes back to a very familiar subject: regulatory clarity. 

Man, I can’t wait ‘til I don’t have to write those two little words again. But for now, we still have a long haul ahead.

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