What is actually financed by crypto denominated loans? Who is paying the interest that’s remitted to crypto-denominated savers?
AFAICT the chief borrowers seem to be other crypto-denominated savers initiating loans against their crypto, hence the apparent demand[0] for stablecoin denominated loans. So USDC savers on Coinbase may be much more exposed to BTC and other crypto assets / securities than they expect. If BTC goes way south and borrowers get called, USDC savers have only Coinbase’s promise of a peg to support them, and Coinbase/USDC may have less fiat reserves than expected, having sent some or much of it out on margin loans.
AFAICT the chief borrowers seem to be other crypto-denominated savers initiating loans against their crypto, hence the apparent demand[0] for stablecoin denominated loans. So USDC savers on Coinbase may be much more exposed to BTC and other crypto assets / securities than they expect. If BTC goes way south and borrowers get called, USDC savers have only Coinbase’s promise of a peg to support them, and Coinbase/USDC may have less fiat reserves than expected, having sent some or much of it out on margin loans.
[0] https://blockfi.com/rates/