A lot of loans have been made in crypto, but lenders have not reaped a lot of profit.
That’s the big takeaway from a new report by Graychain, a startup looking to bring credit assessment to the crypto space.
The startup released its first report on the collateralized crypto lending industry Thursday, estimating that $4.7 billion has been lent out over the history of the sector, but only $86 million has been earned back in interest. That’s a 1.8 percent return, despite the fact that loans typically cost borrowers 6 to 10 percent on an annual basis.
“Generally these companies that are doing really huge originations are originating really short-term loans,” Neil Zumwalde, Graychain’s chief technical officer, told CoinDesk in a phone call.
In other words, it’s easy to make the lending sector look stronger than it is by solely looking at originations. A loan can be quickly opened and closed and earn the lender very little because there is not enough time for any interest to accrue.
Graychain was able to accumulate part of its data from public chains where everything is in the open, including MakerDAO, Compound, dYdX and Nuo. But the report notes that 65 percent of the originations have been on Celsius and Genesis, which are private, and less prone to share full information about their businesses.
So Graychain offered the following note of caution in its report:
“A good proxy for the industry’s health is the amount of interest collected. We have estimated this number.