The crypto lending market has been on the rise despite the unprecedented uncertainty following the novel coronavirus (COVID-19) pandemic. This market has grown to a significant $13 billion in loans within the past few years presenting an opportunity for DeFi’s and stablecoins to gain more traction within the young market. According to Coinbase’s recent blog, innovations in this space are set to attract more lucrative interest rates given the growing demand in crypto based assets.
Ideally, these markets allow investors to borrow or stake collateral on the digital assets owned by the individuals or entities. Coinbase has since moved to capitalize on the current market opportunities as the crypto industry struggles to match the ongoing global downtrend in asset prices. Despite the bear markets, lending products within the crypto niche have become more expensive. Recent reports within the industry have attributed this valuation to the volatility of digital assets and the opportunities to make money off stablecoins.
DeFi Interest Rates on the Rise
The DeFi crypto market has emerged as a safe haven for some investors looking to leverage its volatile nature amid the COVID-19 pandemic. According to Coinbase recent blogs on the crypto market opportunities, this space presents an opportunity to make money off the current trends given its prevailing uncertain nature. The blog reads,
“More lending desks will accept crypto as collateral, stablecoins will grow in adoption, crypto to fiat bridges will be more efficient, and DeFi will become more mainstream and have better protections against smart contract risk.”
The blog further highlights that crypto market stakeholders are opting for stablecoins as the market stakeholders seek certainty. Based on this development, Coinbase wrote that the market rates might gradually increase as crypto adoption grows globally,
“Until then, we can enjoy higher APY on stablecoin lending rates on places like Compound, Dharma, and Dy/Dx.”
These pegged digital assets have also been growing since the market plummeted in mid-March. Coinbase noted that’s these crypto coins have been attributed to more stability as market participants acquire less volatile instruments within the crypto assets. The blog particularly notes stablecoins’ can be used more actively compared to peer cryptocurrencies,
“It takes time to upload cash into crypto. Many borrow use-cases require immediate action, and thus restrict options to crypto-native solutions where stablecoins are ready to deploy. This increases demand for stablecoins.”
Coinbase added that they are optimistic of the market growth as more borrowers move to capitalize on the available arbitrage positions in crypto derivatives and the high APY rates on stablecoins. In addition, they noted an intention to make a killing off the prevailing market prices,
“Market sentiment specifies demand preference, but overall demand remains high in both bullish and bearish markets. Coinbase will look to expand borrow / lend services where possible with the goal of increasing borrow / lend liquidity and helping the crypto market mature.”