The “culture of excess” in crypto lending is over

After a tumultuous first half of the year, the crypto lending market is maturing, according to Ledn Co-Founder and CSO Mauricio Di Bartolomeo.

In this episode of The Scoop, Bartolomeo shares his insider perspective on the state of crypto lending, including what types of lending he believes involves the least amount of risk.

According to Bartolomeo, the liquidity crisis following the collapse of Three Arrows Capital earlier this year has the surviving lenders thinking more seriously about risk management: 

“Right now there is a huge focus on risk management — everybody is tightening up their covenants, everybody is trying to ensure that this doesn't happen again — and I think that has brought the space to a more balanced equilibrium.”

Out of the various sources of demand for crypto loans, Bartolomeo believes delta-neutral market makers provide some of the best opportunities, given such market making strategies do not rely on the market moving in a particular direction:

“The entities that performed the best typically were these high-quality market makers that take non-directional positions… that is the type of activity that we think is best suited to minimize risk.”

One sign of increasing market maker activity, Bartolomeo explains, is the tightening of average spread on exchanges:

“Today what you are seeing is that the average spread in most exchanges is getting tighter and tighter and tighter and tighter, and I think this is an expression of how many market makers are now coming in to narrow those gaps.”

Episode 100 of Season 4 of The Scoop was recorded remotely with The Block's Frank Chaparro and Ledn Co-Founder and CSO Mauricio Di Bartolomeo.

Listen below, and subscribe to The Scoop on Apple, Spotify, Google Podcasts, Stitcher, or wherever you listen to podcasts. Email feedback and revision requests to podcast@theblockcrypto.com.

This episode is brought to you by our sponsors Tron

About Tron

TRON is dedicated to accelerating the decentralization of the internet via blockchain technology and decentralized applications (dApps). Founded in September 2017 by H.E. Justin Sun, the TRON network has continued to deliver impressive achievements since MainNet launch in May 2018. July 2018 also marked the ecosystem integration of BitTorrent, a pioneer in decentralized web3 services boasting over 100 million monthly active users. The TRON network completed full decentralization in December 2021 and is now a community-governed DAO. | TRONDAO | Twitter | Discord |