Crypto lending rates adjust in real-time based on supply and demand. There is no intermediary capturing spread as profit, which pushes rates toward true credit costs instead of retail markups.
Lower rates come with self-custody risk and liquidation risk if collateral falls sharply. Users must understand forced selling during volatile downturns before treating DeFi as a cheaper margin replacement.
As crypto lending becomes cheaper and more accessible, traditional margin lending loses its cost advantage. Banks and brokerages must innovate or accept margin-business margin compression.
Cheaper borrowing typically increases leverage. Monitor open interest in derivatives and on-chain loan volume to gauge whether lower rates are funding productive activity or building systemic risk.
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