Скачать или смотреть How to think about savings rates in crypto

Introduction
Lending and borrowing cryptocurrencies is becoming an increasingly important sub-sector of the crypto industry, one that may end up shaping how the underlying assets themselves are valued and priced in markets. Until recently, the two mantras in crypto have always been to HODL (hold) and keep crypto assets in self-custody - not your keys, not your coins. Unsurprisingly, crypto savings accounts, where users relinquish control over their assets in exchange for high interest rates, are a controversial topic in the crypto community.

On the other hand, since many crypto enthusiasts invest in crypto with a long-term mindset anyway, the idea of letting assets generate a return regardless of the price appreciation of the underlying asset is an appealing one to many. If implemented properly, crypto savings accounts have the potential to draw in new investors while encouraging the movement of crypto capital out of storage and into markets, thereby facilitating adoption and new use cases for crypto.

Interest rates are important in financial markets because they fill the gap between people with surplus assets they can’t use, and people who need assets because they have a productive or investment use. By trading the time value of an asset, both parties benefit in a non-zero-sum manner. For blockchain assets, vibrant lending markets are important because:

Borrowing mechanisms are extremely limited, contributing to mispriced assets (e.g. “scamcoins” with unfathomable valuations because there’s no way to short them).

Blockchain assets have negative yield, resulting from storage costs and risks (both on-exchange and off-exchange), without natural interest rates to offset those costs.

In this analysis, we explain what crypto savings accounts are and untangle the different models that exist. The aim is to provide a framework for investors to make it easier to assess risks and make informed investment decisions.

How do crypto savings accounts work?
Crypto savings accounts work in a similar way to normal bank savings accounts. In a nutshell, you lend money to an institution which lends your assets to borrowers in need of liquidity. However, these loans are relatively secure since the loan providers ask the borrowers to deposit crypto assets themselves, as security for the loan. Most providers ask for a ‘loan-to-value’ ratio of 50% meaning that if a borrower wants $1000 they’ll need to deposit $2000 worth of bitcoin for example, as security for the loan.

Who are these lending providers lending my assets to?
Most commonly, these are institutions and individuals that hold cryptocurrency and need short-term liquidity but don’t want to sell their cryptocurrency. Furthermore, they wouldn’t be able to receive loans against their crypto assets as easily from traditional lending providers such as banks that are reluctant to handle crypto assets.

To give a few examples of the type of companies using crypto-backed loans:

Cryptocurrency Miners: need financing to cover their operating expenditures (pay employees, electricity costs etc.).

Traders: want to seize arbitrage opportunities and need short-term liquidity to execute profitable trades.

Hedge funds: have invested in ICO’s or other digital assets and want to leverage their position to pursue more investment opportunities.

Cryptocurrency Exchanges: need financing for their margin lending and trading services.

How are interest rates determined and why do they differ between providers?
Generally speaking, interest rates in a given market are determined by supply and demand. If there’s a lot of borrow-demand for a specific asset, interest rates for that asset will naturally go up in order to incentivise more lenders to deposit that asset. Looking at one of the borrower profiles mentioned above, namely traders, demand for stablecoins like USDT would for example go up when traders pursue a long-strategy ( to buy crypto with the borrowed USDT ) and demand for crypto assets like BTC or ETH would go up when traders pursue a short strategy ( to sell the crypto and reimburse later when the asset is cheaper). As such, interest rates for any given asset are a product of the aggregate demand and supply of all borrowers and lenders.

Conclusion
In this article we pointed out that savings rates differ substantially. First, rates can differ significantly between CeFi and DeFI because of the different supply and demand triggers, and additional incentives in DeFi (“Liquidity mining”) to bootstrap liquidity. Also within CeFi or DeFi, interest rates deviate substantially, depending on the business model or the risks of the protocol.

To help readers put the different interest rates in context, we described the various risks that come with depositing your savings with either decentralized protocols or traditional companies, as well as listed the best practices for each.