A big spike in the rate of interest being paid to Ethereum and Litecoin lenders is being shown on Bitfinex this morning. At the time of writing, rates have jumped up to 0.05% per day on ETH and 0.0443% per day on LTC. This translates into simple annual rates of 18.25% for ETH and 16% for LTC. BTC lending rates on Bitfinex remain lower, but have also moved up over the past several days, now reaching 0.0174% per day (6.35% annualized).
Crypto market watchers should notice that investors lending out their crypto balances as margin on exchanges are demanding higher rates as the price of crypto currencies has been declining. This makes sense since I’d want a higher rate to lend my crypto as I expect the value of that crypto to be lower in the future since I want to be compensated for the risk of declining crypto prices.
On Poloniex, the rate for BTC loans remains near 0.0061% per day, but the interest rate for DOGE (which has been the best performing major crypto currency over the past month) is commanding interest rates of 0.60% per day, which translates into over 250% annualized.
These wild rates might not last very long, but its informative to see how markets are reacting to the expectation of lower crypto currency prices. Borrowers (speculators) seem willing to pay higher rates for cryptos they expect to decline in value, and lenders seem willing to facilitate these loans as long as rates rise to compensate.
For more information on crypto margin lending, see my previous post.