What the crypto boom tells us about P2P

Last August, we wrote an article asking if cryptocurrency was gaining momentum in the peer-to-peer lending space.

When we wrote this piece, the cost of one Bitcoin was hovering between the £8,000 and £9,000 mark. Today, it has reached an all-time high of more than £25,000.

Meanwhile, rival cryptocurrency Ethereum has seen its value soar by almost 400 per cent over the past year, while the likes of Litecoin, Zcash, and Polkadot have all reached record values in recent months.

The cryptocurrency boom is showing no signs of slowing down.

Amid global economic uncertainty and low interest rates across the spectrum, cryptocurrency is increasingly viewed as a safe haven, insulated from stock market volatility and the threat of negative interest rates on cash reserves.

But for P2P lending platforms, there is another reason to be optimistic about the crypto rush.

The recent surge has been fuelled by a mix of both retail investors and institutional investors. This just happens to be the same investor base that P2P lending platforms are targeting, so it bodes well to see these groups becoming more risk aware and seeking out alternative investment opportunities.

Bitcoin was created in 2009 – four years after the first P2P lending platform launched in the UK. These alternative investment options have grown up together, overlapping occasionally via cryptocurrency exchanges such as Bitfinex, and Ethereum-based lending platforms such as Aave.

These overlaps are becoming more frequent. In November, crypto-platform Sikoba partnered with blockchain provider Horizen to boost its P2P credit system. And Bitfinex has now launched Bitfinex Borrow, a P2P digital token loan exchange.

The growth of P2P may have been slowed by the Covid-19 pandemic, but this new crypto surge is evidence that there is still a huge appetite among investors for digital investment portfolios, risk-aware alternatives, and decentralised finance.

If P2P lending platforms can build on this trend, the crypto boom could pave the way for the mainstreaming of alternative finance.