Crypto Loans Reportedly Offer Worse Yields Than 3-Month US Treasuries

According to a recent Bloomberg report, “the crypto yields that institutions typically seek have fallen below what the U.S. government pays to borrow for three months, giving the hedge funds and family offices that have flocked to the space one less reason to keep investing. .”

Here is how Investopedia defines crypto lending:

Crypto lending is the process of depositing cryptocurrency which is loaned to borrowers in exchange for regular interest payments. Payments are made in the form of cryptocurrency which is usually deposited and compounded on a daily, weekly or monthly basis.

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For example, on the Gemini crypto exchange, after opening an account, “you can buy any amount of cryptocurrency and immediately transfer it to Gemini Earn to start earning interest on your holdings.”

Currently (as of September 18), if you deposit $10,000 worth of Bitcoin, you can earn 2.75% APY:

Treasury Bills (or T-Bills) are debt securities — with a maturity of one year or less — issued by the United States Department of Treasury.

As you can see from the chart below (per MarketWatch), on Friday, September 16, the 3-month US Treasury yield was 3.144%.

On Sept. 13, Bloomberg published a report that “the Federal Reserve’s hawkish stance is driving interest rates up almost everywhere — except in the speculative world of crypto, where yields have crashed along with volumes, wiping out some major avenues of double-digit generation are returning, while the implosion of the Terra stablecoin project and the failures of crypto lenders like Celsius Network have shaken confidence.

Jaime Baeza, CEO of crypto-focused hedge fund ANB Investments, told Bloomberg:

Two years ago, interest rates in crypto were at least 10% and in the real world, rates were negative or close to zero. Now it’s almost the opposite, as crypto yields have crashed and central banks are raising rates.

The Bloomberg report went on to point out that “unlike in traditional markets, falling yields do not signal lower risks for crypto” since “returns are shaped by trading volumes rather than risk sentiment, and reflect the rate an investor can expect to earn from loans”. hold assets on decentralized finance exchanges and protocols, or deposit them with crypto lenders, often in the form of stablecoins.

The report also stated that “because they have no direct link to central bank rates, crypto yields may plummet even as borrowing costs rise in financial markets to reflect strong Fed hikes”.

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Crypto Loans Reportedly Offer Worse Yields Than 3-Month US Treasuries


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