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Yields on cryptocurrency loans fell below what the US government pays to borrow for three months. This is another reason why the digital currency space has become less attractive to amateur investors and those who are not keen advocates of decentralization.
Rising interest rates and the general economic situation have hit the cryptocurrency industry hard.
“Two years ago, cryptocurrency interest rates were at least 10% and real world rates were negative or close to zero,” comments James Baeza, CEO of ANB Investments. “Now it’s almost the opposite as cryptocurrency yields have fallen and central banks are raising rates.”
Unlike traditional markets, falling yields don’t make cryptocurrencies any less risky. Return is determined by trading volumes, not risk appetite, and represents the rate an investor can expect to earn by lending a stake in a digital currency to decentralized exchanges and financial protocols.
Since they are not directly linked to central bank rates, the yield of cryptocurrencies can also decrease as borrowing costs increase in financial markets. Due to the lower yields, investors will be less likely to purchase tokens to lend, which will lead to lower demand and, in turn, lower prices.
As a result, the yields of various bonds are currently between 3 and 4.4% in some cases, which, while not a large amount, is far more than you can get for crypto loans in some places.
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