The crypto money market is booming, and it’s all thanks to DeFi. Ever since the DeFi “summer of 2020”, when the total value locked (TVL) in DeFi smart contracts rose by 2 000% in just a few months (capping US$20-billion), enthusiasm for crypto money market services has reached an all-time high.
DeFi’s TVL currently stands at $53-billion.
The demand for crypto credit keeps growing due to the many use cases that crypto lending has opened up for crypto investors and holders. Whether leveraging crypto positions via margin loans or realising tax benefits through borrowing crypto, the flexibility of programmable currencies continues to open doors.
For example, just one astounding development is the flash loan where, by utilising smart contracts, investors can leverage cryptocurrency with zero collateral on a per-transaction basis. If the transaction fails, it is rolled back and the borrower pays nothing but the Ethereum “gas fee”. If it succeeds, the borrower pays a small interest fee of 0.09% on the loan. Such loans are impossible without using smart contracts, and they provide an inkling of the almost limitless potential of programmable currency.
DeFi means you can still earn money in the crypto money market, even during a crypto crash.
South African exchanges like Ovex can now offer a plethora of services previously unheard of in the crypto sphere. One such service is that of high-interest-earning deposit accounts where crypto holders can earn up to 20% annualised interest on certain cryptocurrencies.
That kind of return is virtually unheard of in the day-to-day experience of wealth managers, and probably the most impressive fact is that crypto holders can still earn high interest even when a coin’s value has crashed.
The recent bitcoin crash in May 2021, which saw the currency plummeting to nearly half its peak value of over $60 000 in April, has done nothing to tame the eagerness with which investors are adopting DeFi and locking up their crypto in DeFi exchanges to earn large amounts of interest.
Even the unprogrammable bitcoin has now found a way into DEXes by means of the ERC20-compliant token wrapped bitcoin (WBTC) which is pegged by bitcoin’s price.
By offering traditional centralised finance (CeFi) services, but on a DeFi platform, DEXes can now make money for their clients regardless of a coin’s current price — through respectable interest rates. This trend is set to continue so long as the demand for lending stays high, which all signs indicate it will into the foreseeable future.
Many companies have also started buying up crypto in bulk in an effort to hedge against fiat currency depreciation. That means a lot of big money is now tied up in ensuring the success of crypto.
Stablecoins add another layer of stability to the DeFi ecosystem. By using stablecoins, crypto holders can remove yet another level of risk from their interest account deposits, if they wish to sell that crypto in the future.
Ovex offers several interest-earning levels in its interest accounts depending on the type of coin being deposited. Even the lowest-earning coin – bitcoin — offers a respectable 4% annualised interest while stablecoins like tether (USDT), binance USD (BUSD) and trueUSD (TUSD) offer higher levels of interest (9-10%) due to their reduced volatility.
Deposits of R500 000 or more qualify for higher interest rates, reaching up to 20% for certain cryptocurrencies. These rates are established on a case-by-case basis and depend on the coin being deposited, and the amount.
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