Explainer: The world of crypto lending
Major U.S. cryptocurrency lending company Celsius Network froze withdrawals and transfers on Monday, citing “extreme” market conditions, sparking a sell-off across crypto markets. Here’s what you need to know about crypto lending – a corner of the digital asset market that has boomed over the last two years during soaring interest in cryptocurrencies. Just as customers at traditional banks earn interest on their savings in dollars or pounds, crypto users that deposit their bitcoin or ether at crypto lenders also earn money, usually in cryptocurrency. While savings at traditional banks offer paltry returns due to historically low interest rates, crypto lenders offer much higher returns – at the very top end as much as 20%, though rates depend on the tokens being deposited. Crypto lenders make money by lending – also for a fee, typically between 5%-10% – digital tokens to investors or crypto companies, who might use the tokens for speculation, hedging or as working capital. The lenders profit from the spread between the interest they pay on deposits and that charged on loans.
Read full explainer: The world of crypto lending.