The long-term swap improves liquidity in cryptocurrency debt market
Babel Finance announced its completion of a 2-year Mark to Market Cross Cryptocurrency Swap, equivalent to US$50 million between Bitcoin and Ethereum.
Quick Facts
- Transaction: Market to Market Cross Cryptocurrency Swap (MtM CCS)
- Currencies: BTC and ETH
- Amount: US$50M
This is a rare 2-year transaction in the cryptocurrency market for institutions, representing an increase in liquidity sources from new transactions and products. It also marks another step toward greater maturity for the cryptocurrency lending market.
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The synthetic swap is an upgrade from a pure deposit/loan transaction, and will contribute toward a more efficient marketplace and reduced arbitrage space, as well as providing more liquidity for market participants, said Babel Finance’s Head of Treasury Yang Song.
This new transaction type comes as more experienced financial professionals continue to join Babel Finance. Yang Song, who oversaw the transaction, has over 10 years’ experience in treasury management at Commerzbank AG., the second-largest bank in Germany.
“Until 2022, we rarely saw liquidity transactions of over three months in the crypto market. This might be the first transaction of its kind,” said Yang Song. “This could be regarded as an upgrade in crypto loan services from generation 1.0 to 2.0.”
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There is a lack of comprehensive data on the cryptocurrency lending/borrowing market at the moment. But according to preliminary estimations, the crypto lending/borrowing market size, including CeFi and DeFi, has reached approximately US$8.2 billion[1], with active parties including Genesis Capital, Celsius, B2C2, Nexo, Babel Finance and more. Yet long-term liquidity is not often provided.
This 2-year transaction indicates that long-end assets are becoming more diversified amid the continued development of the crypto ecosystem. As the cryptocurrency market structure matures, more long-end assets are on the way. This will result in increased market demand for long-end liquidity. Overall, this indicates the healthy development of the crypto market structure, and the growing confidence of market participants.
“This ETH lending demonstrates increasing long-term market demand for ETH, based on developments in DeFi, NFTs, and new projects,” said Yang Song.
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