Ledn’s Strategic Moves to Survive the Crypto Credit Crisis
Ledn, a crypto lending firm, managed to remain afloat amid last year’s crypto credit crisis, which saw several lenders collapse. While others were intertwined and spread cracks rapidly, Ledn’s co-founder, Mauricio Di Bartolomeo, revealed that they quickly diversified away from being dependent on the collapsed Genesis Trading. Ledn’s survival strategy was to transition away from Genesis and open up its doors to other borrowers. By the time the crypto credit crisis occurred, Ledn had largely transitioned to its own order book, which helped the company dodge the bullet.
Diversifying away from Genesis
Ledn originally teamed up with Genesis in May 2020 to provide a stronger offering, but the latter was unwilling to make a strategic investment in Ledn. Instead, Genesis started working with other lending companies like Gemini, which signaled to Ledn that it needed to diversify away from the relationship. Ledn found that some of Genesis’ borrowers came directly to it to cut out the middleman. Ledn’s lending desk largely lends out uncollateralized loans to market makers, which generate more than 50% of revenue from traditional finance to limit crypto exposure.
Steadfast onboarding requirements
Ledn survived by choosing not to work with collapsed crypto hedge fund Three Arrows Capital, which had exposure to many crypto lending platforms like Genesis. Bartolomeo said Three Arrows came by Ledn’s desk three times to try to get on board, but the company has pretty strict onboarding requirements, including a financial statement, which Three Arrows wasn’t willing to share at the time.
Generating yield
Ledn continues to offer rates of 9.5% on USDC. It generates yield by lending out uncollateralized loans to market makers and effectively letting its customers loan to one another by offering overcollateralized Bitcoin-backed loans at 12.9% APR, taking a fee from this spread. Ledn has processed nearly $600 million of these loans, with 40% to 50% going to Latin America, where access to credit is a challenge. Demand for loans rose during February and March, and many former BlockFi and Genesis clients are coming to Ledn for loans.
Ledn’s Path Forward
Ledn plans to slowly expand its product offering while improving its proof of reserves system. The company is partnering with The Network Firm to produce attestations to show that all customer assets held on the platform are accounted for and in line with liabilities. Ledn plans to provide the functionality to hold crypto on its platform without lending it out and is considering bringing ether to its offering. The company aims to offer loans with much lower rates to make them more widely available.
Source: The Block
