Amidst all the craziness in the market especially with insolvency rumours across platforms and firms, we hear from Juntao, CEO of a crypto-borrowing and lending platform Hodlnaut, who gave his insights to the current state of CeFi borrowing and lending space.
Hodlnaut saw over US$150M of user withdrawals over the past 2 weeks (as per time of writing on 20//06/2022) which amounted to 35% of net outflow in assets under management.
90% of withdrawals are from retail users which, based on the fear and uncertainty of the current market conditions, is unsurprisingly. However, AUM ratio between corporate to retail users remains at 4:6.
The Hodlnaut team has also increased the mandate of having 20M on hot wallets instead of the 10M previously.
Especially during these times of noise and madness, investors are hyper sensitive to any news that may hinder the loss of their funds. Hodlnaut decision to allow withdrawals despite the outflows of capital is a signal in hopes for the rest of the CeFi industry to follow.
How Hodlnaut Faded 3AC
Hodlnaut has a relatively stringent onboarding requirement which enabled them to fade the effects of the backlash from one of the largest crypto insolvency spells.
“We had no exposure to them”
Despite working with Three Arrows previously, the Hodlnaut team required them to borrow collateralized and provide financial statements which 3AC failed to provide.
This may be overlooked from other parties involved with 3AC as Hodlnaut continues to retains their sovereignty in the way they conduct business.
The company has also received an In-Principle Approval (IPA) from the Monetary Authority of Singapore(MAS) and continues to work towards meeting the requirements of the MAS to receive its full licence. Something investors should be wary about when deciding where to allocate their funds.
Hodlnaut’s Way Ahead
The massive shrink in credit lines will be expected and a “platform like ours start to unwind our loans with counterparties to facilitate withdrawals.” It will be unlikely anyone will also be lending uncollateralised in the near future.
Hodlnaut’s safety net is iTrustFinance. They have been insured by the 3rd party for the purchase of ERC721, where investors will still net around 6% APR after the cost of cover.
Although the CeFi space has been hit hard and it will be difficult to tide through, the team is continuously building and developing new features in diversifying revenue streams for investors.
They recently conducted a pre-launch testing for their latest product, HODLoans – where users with the opportunity to take a stablecoin loan easily so that they can maximize earning opportunities on our platform whilst still HODL-ing on to their assets.
When there is so much on the table especially during uncertainty, it is important for transparent communication regardless of how good or big someone’s reputation is.
Especially in the market of CeFi, gaining investor’s trust and building relations through open and transparent communication contributes the key success factor.
During a time when trust is scarce, utter transparency cuts through all of that. In my opinion, only when we are able to have full consensus and comprehension of the former, only then we can explore much more crypto has to offer, decentralization.
I’d still think we are not at the level of maturity for a fully decentralized world. Perhaps the systems we all know will coexist with the introduction of decentralized one. Till then, where there is an ulterior motive involve, the shift towards using crypto as a financial tool would likely be a bumpy but rewarding one.
[Editor’s Note: This article does not represent financial advice. Please do your own research before investing.]
Featured Image Credit: ChainDebrief