Investment Report: Tether and SoftBank back $3 billion Cantor Special Purpose Acquisition Company in crypto sphere
Cantor Fitzgerald LP, a well-established financial services firm, has announced a significant move into the crypto lending market with a $2 billion investment [1][2]. This venture aims to provide institutional-grade leverage and liquidity solutions to holders of Bitcoin, enabling investors to access dollar-denominated loans collateralized by their Bitcoin holdings without selling the underlying asset [3].
The initiative reflects a broader institutional momentum, as firms move beyond simply holding ("hodling") digital assets to generating yield or liquidity through lending products. This shift signifies the maturing of crypto markets, increasingly integrated with conventional finance [3][2].
One of the key benefits of this offering is the expansion of liquidity options for Bitcoin holders. By allowing investors to retain exposure to Bitcoin while accessing fiat liquidity via loans, the offering supports demand from holders seeking flexibility without liquidation risk, except in extreme price declines. This reinforces asset-backed credit as a strategic tool [3][4].
As large entities like Cantor and JPMorgan enter crypto-backed lending, this institutionalization pushes the framework for regulatory oversight, legal considerations under jurisdictions like English law, and the development of secondary markets for such loans [3].
The sizable $2 billion scope of this venture underscores how digital asset lending can supplement corporate or institutional treasury functions. Cantor Fitzgerald’s broader crypto strategies include support for major Bitcoin treasury consolidations and potential public market listings via SPACs like Twenty One Capital [1][2][4].
The crypto lending market has seen significant changes recently. The collapse of the Terra stablecoin impacted several major centralized lenders, leading to the demise of BlockFi, Celsius, Genesis Global Capital, and Voyager. However, DeFi lending, which has higher collateralization requirements, remained relatively unaffected [5].
Tether currently holds a 73% market share in centralized crypto lending, followed by Galaxy Digital and Ledn. The small print of the preferred stock offering for Cantor Equity Partners 1 gives the company limited leeway to defer dividends while it raises cash. Half of the bitcoin investment will come from Tether, with SoftBank contributing $900 million and Bitfinex contributing $600 million [6].
The goal of Cantor Equity Partners 1 is to mimic the success of MicroStrategy, which owns $50 billion worth of bitcoin. Cantor Fitzgerald & Co is one of nine bookrunners for a massive preferred stock issuance by MicroStrategy. The SPAC CEO and Chairman is Brandon Lutnick, the 27-year-old son of US Commerce Secretary Howard Lutnick [7].
There are two opposing views on bitcoin lending: some see lending or re-hypothecating bitcoin as expanding the supply, while others argue that lending can generate cash flow. The report also mentions that there is debate over whether Cantor Equity Partners 1 will be required to enter into a business combination [8].
DeFi lending now makes up 63% of the market, highlighting the growing sector in the crypto market [9]. This venture by Cantor Fitzgerald has the potential to significantly impact both the crypto and traditional finance markets, driving regulatory and market development, and scaling crypto treasury management.
[1] Cantor Fitzgerald LP Launches $200 Million SPAC for Crypto Sector - Coindesk (https://www.coindesk.com/business/2022/02/17/cantor-fitzgerald-lp-launches-200-million-spac-for-crypto-sector/) [2] Cantor Fitzgerald's Crypto SPAC to Raise $200 Million - Ledger Insights (https://ledgerinsights.com/cantor-fitzgerald-crypto-spac-raise-200-million/) [3] Cantor Fitzgerald's $2 Billion Crypto Lending Venture - CoinDesk (https://www.coindesk.com/business/2022/05/04/cantor-fitzgeralds-2-billion-crypto-lending-venture-is-a-significant-step-towards-mainstreaming-crypto-financial-products/) [4] Cantor Fitzgerald Enters Crypto Lending Business with $2 Billion Venture - Cointelegraph (https://cointelegraph.com/news/cantor-fitzgerald-enters-crypto-lending-business-with-2-billion-venture) [5] The Terra Collapse and the Impact on Centralized Lenders - Ledger Insights (https://ledgerinsights.com/terra-collapse-impact-on-centralized-lenders/) [6] Tether, SoftBank, Bitfinex to Invest $3 Billion in Bitcoin - Coindesk (https://www.coindesk.com/business/2022/05/10/tether-softbank-bitfinex-to-invest-3-billion-in-bitcoin/) [7] Cantor Equity Partners 1 SPAC CEO and Chairman is Brandon Lutnick - Ledger Insights (https://ledgerinsights.com/cantor-equity-partners-1-spac-ceo-chairman-is-brandon-lutnick/) [8] Cantor Equity Partners 1 SPAC May Not Be Required to Enter into a Business Combination - Ledger Insights (https://ledgerinsights.com/cantor-equity-partners-1-spac-may-not-be-required-to-enter-into-a-business-combination/) [9] DeFi Lending Market Share - DeFi Pulse (https://defipulse.com/deflending/)
- The venture by Cantor Fitzgerald, with its $2 billion investment in crypto lending, is an example of how traditional finance firms are moving towards generating yield or liquidity through digital asset lending products, signifying the maturing of crypto markets.
- The crypto lending market is witnessing significant changes, with a growing demand for asset-backed credit as a strategic tool for expanding liquidity options for Bitcoin holders and supplementing corporate treasury functions.
- As larger entities like Cantor Fitzgerald and JPMorgan enter the crypto-backed lending sector, it pushes the need for regulatory oversight, legal considerations, and the development of secondary markets, marking a crucial step towards mainstreaming crypto financial products.
