The emergence of cryptocurrency into the global financial system has brought a new dimension of the crypto interest rate. The crypto lending platform, which involves the lending and borrowing of cryptocurrency, is becoming a unique turning point that could quickly determine how the digital asset is regarded in the financial market.
This platform of lending out cryptos comes with a twist to how the market investors view cryptocurrency. The crypto interest rate generated via the lending platforms can lead to an increase in the supply and movement of cryptocurrencies in the capital market.
How the crypto interest rate works
The way the interest rare works in the conventional financial market is that whenever an individual or organization wants to take a loan, they will agree with the lending institution on a particular percentage of the loan amount to be paid, i.e., the interest, back in addition to the principal amount. This additional percentage is called the interest rate.
In the digital assets industry, the holders and owners of cryptocurrency are encouraged by the crypto interest rate generated by their virtual assets after being loaned out.
There is a high investment return in lending out the digital currency, compared to keeping it in their e-wallets. A lot of investors are lending out their cryptos for investment and trading, and at the same time generating more cryptos from the interest paid on their digital assets.
Crypto market volatility
The lending platform of the cryptocurrency industry is engulfed in a volatile crypto interest rate, as the sector is still in its developmental stage. In 2019, a report had it that the lending platform of cryptocurrency recorded a total borrowing of 900 million US Dollars with interest generated on this amounting to about 16 million US Dollars.
The interest rate of the cryptocurrency industry can attract a lot of investors who are not into cryptos to evaluate the market and get involved.
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