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Several lenders were preparing for the correction.

The COVID-19 pandemic and latest bitcoin bull run have provided a handful of stress tests for cryptocurrency lending firms.

During Wednesday’s market correction lenders were more prepared.

The latest dip didn’t hurt as much as March 2020, but it did clear out “excess leverage,” said Nexo co-founder and managing partner Antoni Trenchev.
“It was so rapid. Because there was quite a lot of leverage, that’s why the crash was so deep,” Trenchev said. “Now that it’s cleaned up we don’t have such excessive leverage in the system right now. That’s why we’re seeing this recovery right now.”

Nexo lowered its loan-to-value (LTV) ratios a few weeks ago because of froth in the market, following the lead of Unchained Capital, which reduced its LTVs to 40% in February.

“Everybody had more wealth in bitcoin and no one is in a position to complain about a move like that, and it made this period less stressful,” said Unchained CEO Joe Kelly.

This time, margin calls’ impact on Unchained’s loan book was much less significant, Kelly said
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