CeFi interest rates fall: Will BlockFi, Ledn and Nexo fall?

CeFi interest rates fall: Will BlockFi, Ledn and Nexo fall? – Mail Bonus

It is becoming increasingly difficult to generate a return on encryption. The collapse of the Terra ecosystem – which wiped out up to $ 50 billion – led to a downgrade of interest-based Defiance (DeFi) protocols.

At the other end of the table, centralized finance, or CeFi, where all processes are rooted in a central entity, has endured a relatively peaceful bear market, yet interest rates are falling.

In the first month, investors who have an account with a CeFi service provider such as Ledn, Celsius, BlockFi or Nexo generally receive e-mails with information about the interest rates for the next month.

Shocking for those looking for passive income, interest paid by CeFi providers have fallen since 2021 the bull market. Giving up cryptographic assets for low interest payments has encouraged some cryptocurrency enthusiasts to take control of their private keys, even drawing comparisons with older banking.

In the table below, three of the largest holders of Bitcoin (BTC) and cryptocurrencies have fallen, taking into account both interest and the amount of interest paid on each asset.

CeFi interest rates have almost fallen in recent years. Source: The data was taken from the website of each service provider.

Cointelegraph spoke with three of Bitcoin’s largest lenders and other cryptocurrencies to understand whether CeFi lenders’ interest rates could eventually bottom out, such as 0.01% interest rates – as with banks – and why these lenders and interest rates exist.

Interest rates will remain attractive

Representatives from Ledn, Nexo and BlockFi agreed that although there is less interest in cryptocurrencies, it is outperforming older lenders. Mauricio Di Bartolomeo, co-founder of Ledn in Canada, told the Cointelegraph: “It’s still five to 10 years since Bitcoin interest rates came anywhere close to those in fiat bank accounts.

“Most older bank savings accounts are paying out only basis points (between 0.01% and 0.05%). The interest rate for our Bitcoin savings account product is still 5.25% APY for the first 0.1 BTC and 2% APY for positions above 0.1 BTC as of today.

In a tweet, Di Bartolomeo shared that “changing market conditions” have forced lenders to lower their interest rates, as the difficulty level of profiting from arbitrage opportunities and futures trading has increased.

Jonathan Haspel, a senior institutional trader at BlockFi, agreed, adding that “returns related to crypto-interest-bearing accounts affect a number of factors, including market sentiment, financing ratio, supply and demand, and balance sheet optimization.

It is true that the sentiment of the cryptocurrency market has plummeted since the collapse in March 2020, while the funding ratio, especially for altcoins, has fallen to “concern”. Haspel explained:

“In the end, compressed interest rates and fluctuations are a sign of the development of the asset class. Since the rate of return was once unrestricted and liquidity was once distributed, there are more players in the cryptocurrency game who feed its competitive funding and extensive access.

Bullish on CeFi: The future is still bright

Zac Prince, CEO of BlockFi, told Cointelegraph that he was still “bullish on […] customers’ desire to earn long-term cryptocurrency interest rates.

In a similar vein, Kosta Kantchev, founder and CEO of Nexo, told the Cointelegraph: “Times are changing, but the yield on cryptocurrencies is still many times higher than traditional banks. To back up the price of Bitcoin flatlining around the $ 30,000 mark, Kantchev said:

“Although interest rates on some assets have become more stable, this reflects the assets themselves. I think people are mostly ignoring sky-high interest rates on some of the new properties on the block. “

Finally, and in consultation with Di Bartolomeo, “no matter how historically volatile cryptocurrency has been, the opportunity is always there. CeFi providers will continue to offer more favorable interest rates than older financial institutions.

It is important to note that Nexo operates a different model, which would explain why interest rates do not fall technically (as shown in the table above). Users experience higher interest rates if they lock the property or hold a percentage of the Nexo icon. In contrast to other CeFi lenders, Kantchev explained:

“Interest rates will not fall. It’s more that the return on Nexo’s older cryptocurrencies is guaranteed to be sustainable in the long run, but eyebrow raises are often available either with Nexo Tokens through our loyalty program or for some of the newer coins we can create so impressive for. harvest. “

Growing adoption and innovation, see regulation

Lowering interest rates should not be a concern: Per Di Bartolomeo, not only are centralized entities “influencing the adoption and development of Bitcoin as an undamaged mortgage,” but older banks could even seek “cooperation” with CeFi players in the future. He said:

“This means that centralized lenders, such as Ledn, will act as a means of bringing legacy capital to Bitcoin – benefiting both Bitcoiners (by letting them borrow at ever-increasing interest rates) and lenders (by offering them high-risk adjustments). return). “

Connected: Can DeFi and CeFi live together? Three gifts from the expert committee

Haspel from BlockFi agreed, “CeFi offers a compelling use case that supports the narrative of cryptocurrency for international money access.” Despite the turbulent sea of ​​cryptocurrencies in the spring of 2022, BlockFi’s sees an increase in global demand for risk-driven cryptocurrencies – such as interest rates – in other emerging digital assets.

“Although credit ratings and a lack of financial history hurt individuals seeking global funding, CeFi lending offers a solution. By using cryptographic assets verified in a transparent and unchangeable ledger, CeFi protocols can quickly verify their assets.

For Kantchev, innovation, customers and new products are just around the corner: “Products that meet sustainable interests that address the rules while customers pay economically will be one of the next such products.”

“The industry has developed tremendously, […] so I am convinced that we will continue to find risk-free methods that yield attractive returns and can be shared with society. “

In the case of Nexo, this means diversifying the product range; for BlockFi, it continues to be on board institutions, while Ledn has expanded into Bitcoin-guaranteed mortgages.

Cointelegraph contacted CeFi service provider Celsius for comment but did not receive a response at the time of publication.