OTOH, banks do this all the time, adjust interest rates on deposits. It's usually because of mkt rates, but whatever. OTOH, what did they expect when they offered 6%?
https://t.co/M7YvecarEp via @CoinDesk
There are some, but they are usually promotions or incentives for new accounts, not general policy. For example, I think there was a bank that offered 5% interest on the first $1000 to attract new customers.
Since opening a bank account requires ID, you can't just cheat that by opening 1000 accounts, either.
They seem to want lots of small customers and no whales. If they were doing legit lending, they wouldn't pay less interest to their biggest investors. Would you rather manage tracking and payouts to a few massive "investors", than thousands of small ones?
It's harder to keep a Ponzi going with whales in the mix. You need to attract even more whales to keep it going, and someone with $1mil+ on deposit isn't going to be held off by excuses or bullshit.
People borrow crypto on exchanges for shorting. They could put their crypto out for shorts on the exchanges that allow it.
I don't think that the lending fees could cover the 6% interest plus overhead, especially since they can't possibly keep 100% of their capital on loan. Then again, bitMex is showing a 77% apy on perpetual short funding.
The reality is that exchanges won't use this service because they either don't need/want it, or they're running a shady exchange.
Most of the exchanges are glorified versions of the bucket shops of the early 1900's. They're really not running exchanges, so much as gambling houses that are managed like bookies. These places don't care if there isn't enough shares to borrow, they'll let you naked short, and if they get into liquidity trouble, they can target big margin positions and wipe them out. On places like bitMex, where people are leveraged up to 100x, a tiny dip can wipe out a bunch of traders.
I recently read, "Reminiscences of a Stock Operator". A great read about the wild world of the minimally regulated markets of the early 1900's. Lots of parallels between the bucket shops of the day and the crypto exchanges of today.
Crypto turned out exactly like anyone with knowledge of the past would have predicted, I like the "Speedrunning bad economics" phrase.
If anything the 2017 frenzy was a great argument for financial regulation.
I assume the interest payments are just rebates being paid off of the profits that the lender makes off of their (probably usurious) loans.
What’s funny is that they originally rolled this product out on March 5 2019, so it’s hard to imagine that circumstances changed so wildly between then and today. My guess is that they announced those generous rates without really thinking through how it would work in practice.
6% ---> 2% in less than 3 weeks.
LMAO. Even kleptocurrency interest rates are plummeting. By this time next month, if the trend continues, it will be less than 1%.
Must be all that ADOPTION the coin shills keep going on about ...