Is Inflation the Catalyst That Causes Mass Crypto Adoption by Businesses?
Inflation is out of control. 7.9% inflation is almost 4x more than the 2% targeted, and today the Fed announced today that it’s raising interest rates for the first time in three years. What’s more, policymakers estimate 6 more hikes this year.
Where are these yields coming from, and how can businesses get in on the action?
Why are there high yields in crypto?
Because more people are willing to borrow assets than there are people willing to lend them
For crypto traders, who view the huge volatility of crypto as a feature, they are constantly looking for more assets to leverage their positions. Such is their conviction and desperation, that they’ll pay these high interest rates.
The lending and repayment is done via smart contracts, so that the lender receives their principle regardless of the traders activity.
Are businesses also doing this?
Yes, billions of dollars of corporate capital are already earning yield..
Hedge funds, listed companies and recently-funded startups with loads of cash in the bank, are all putting their idle treasuries to work in businesses like TrueFi and Maple, who in turn lend it out to exchanges and other “blue-chip borrowers”.
These loans are secured by written and smart contracts, and showcases a growing trend: the intersection of TradFi and DeFi.
Trend or Outlier?
Although these high yield strategies are appealing now, it is known that this is not a permanent feature of crypto. But what’s certain is that private capital is willing to pay more for you to avail your capital to them than the banks are willing to do.
With their cash reservers evaporating, more and more businesses are going to seriously consider investing their money in projects. It turns out that inflation might just be what it takes for businesses to adopt crypto.
Beautifully ironic, given that Bitcoin was specifically designed to be deflationary.
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