Crypto lending is the process of depositing cryptocurrency that is lent out to borrowers in return for regular interest payments called ‘crypto dividends’.
The recent crypto slump negatively impacted several crypto lenders
Photo Credit: Pexels/ Alesia Kozik
After a major slump that lasted almost a couple of months, the crypto industry is trying to break out of its loss spell. Last month, when the overall market cap of the crypto sector fell from the trillion-dollar mark, one blockchain sector – crypto lending – emerged as one of the worst affected parts of the decentralised finance system. Crypto lending is the process of depositing cryptocurrency that is lent out to borrowers in return for regular interest payments called ‘crypto dividends'. Several crypto lending firms have emerged around the world to facilitate this service.
More often than not, crypto investors choose to hold their assets until they see a hike in the price of their assets. These platforms allow crypto holders to earn yields without having to sell their assets.
Both, centralised and decentralised crypto lending platforms are known to offer interest rates as high as 20 percent annual percentage yield.
Crypto lenders also offer crypto loans – in the form of collateralised lending products, requiring users to deposit from a minimum of 100 percent in crypto collateral to borrow cash or cryptocurrency.
In recent weeks however, several crypto lending firms encountered rough business days followed by the crash of Terra, and then the prevailing crypto downturn.
Jersey city-based crypto lender Voyager Digital filed for bankruptcy after it suspended withdrawals, trading, and deposits to its platform.
Crypto lender Celsius Network has been sued on the charges of using customer deposits to rig the price of its own crypto token and failing to properly hedge risk, that led to the freezing of customer assets. The company has filed for bankruptcy.
Vauld, a Singapore-based crypto trading and lending platform with most of its team in India, has become the latest crypto firm to halt customer withdrawals amid the unforgiving market din.
Cryptocurrency is an unregulated digital currency, not a legal tender and subject to market risks. The information provided in the article is not intended to be and does not constitute financial advice, trading advice or any other advice or recommendation of any sort offered or endorsed by NDTV. NDTV shall not be responsible for any loss arising from any investment based on any perceived recommendation, forecast or any other information contained in the article.
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