Digital assets firm Genesis has recently published its Q3 Market Observations Report. In this report, it highlighted some of the major trends dominating the crypto markets. This time around, it appears like the demand for Bitcoin has faded in Q3, 2021 as institutions seemingly explored DeFi platforms and altcoins.
But, the growth of the cryptocurrency market kept strengthening despite the setbacks. Based on the report, Bitcoin (BTC) demand decreased in the third quarter due to the lack of many opportunities for the traders to benefit from spreads between the Bitcoin price in spot and futures markets.
The company also noted a “significant structural change” in the cryptocurrency market, beginning with the deleveraging of retail crypto exchanges. In Q2, many exchanges limited their leveraging offers, like Binance exchange reducing their levels to a maximum of 20X for the accounts opened within 30 days. The report reads:
“In Q1 2021, Genesis first noted a significant decline in the weighting of BTC in our overall portfolio due to the relative lack of BTC-denominated trading opportunities. While this paused in Q2, it resumed over the third quarter due to the continued GBTC premium inversion and flattening of the basis curves.”
The “deleveraging of retail exchanges,” highlighted the report, coupled with the Chinese crackdown on digital assets and cryptos, resulted in a move towards institutionalization in the sector. Consequently, that made Bitcoin less attractive to most opportunistic investors and traders.Buy Crypto Now
Institutions Adopt DeFi – Ether Becomes A Favorite
The company said that the increasing number of institutions coming to the DeFi space. The latest document reported a growing appetite in Ether from institutions to lend and borrow across many decentralized applications (DApps).
Emerging Layer-1 protocols also witnessed a massive spike in interest, with different crypto-native institutions exploring yield opportunities across L-1s that offered attractive rates for stablecoins and ETH/BTC pairs. It led to a considerable increase in price for the altcoin markets, which throughout Q3 continuously gained ground in the market.
Solana (SOL) is one of the top gainers that surpassed Cardano (ADA) after recording a new all-time high last week.
“Alongside greater interest in ETH loan originations during the quarter, altcoins (alts) – and particularly L1 alternatives – saw a boost in demand, serving as natural liquidity pairs for DeFi yield opportunities.”
Despite the lack of interest in bitcoin, the anticipation of the US first futures-linked Bitcoin ETF revived the market with traditional financial institutions, including +$100 billion asset managers and investment banks showing great interest in the product.
In general, Genesis traded more than $37 billion across the derivatives and spot in Q3, 2021. Bitcoin accounted for nearly 61% of Genesis’ OTC (over-the-counter) trading activity, up 47% in Q2.