Cryptocurrencies are bringing a revolution to the world but if you want to use them in order to profit from loans, we have bad news for you. According to a new report made by Graychain, a crypto credit assessment company, $4.7 billion USD has been lent in the crypto industry up until this point. However, the returns from that are only 1.8%.
Borrowers generally get at least 6 to 10% returns on investments per year, so a profit of only 2% is meaningless. Inflation is higher than that in most countries.
The CTO of Graychain, Neil Zumwalde, has said that most companies are actually lending money for very short periods when compared to more traditional loans. Also, it is easier to make it look like the loans are more profitable when you look at their originations only.
He said that the company gathered data from several companies such as Dharma, Compound, Unchained, and Maker in order to make the study. Some companies such as Genesis and Celsius, however, are less prone to offer information and can keep it private. Without this private information, the numbers can be slightly different from the reality.
According to the executive, the market is growing fast. As the industry is maturing, more opportunities are appearing and more loans are being made.
Part of the reason why the profit is so low is that cryptos are volatile and because some of them are very short. As prices change all the time and nobody wants to lose money, people often don’t hold the money long enough.