The interest rate earned on Cryptocurrencies differs depending on the coin. One of the main factors determining the interest rate we can pass on to our clients is supply and demand.
Crypto lending has grown in popularity in the last few years. Loaning Crypto arises from the relationship between three parties; borrowers, depositors and lending platforms.
Investors looking to loan Crypto for various opportunities. Often, it’s more tax-efficient to borrow against Crypto assets than sell them.
Investors looking for opportunities to fund loans in exchange for returns and high yields.
Platforms who manage these loans and ensure that funds are collateralised, risks are mitigated, and analysis and monitoring are in place.
There is a shortage of stablecoins, compared to other Cryptocurrencies, due to this asset still being in its early stages. An emerging market creates opportunities, leading to high demand for arbitrage and where investors are able to take advantage of these circumstances. This structural shortage of stablecoins, coupled with the increasing demand, creates a market with high funding rates.
In simple terms, the increased demand for stablecoins relative to the number of them in existence results in a higher interest return for those able to lend them.