What Is Impact of Imposing Interest Rate on Digital Assets?

What Is Impact of Imposing Interest Rate on Digital Assets?

Lending and borrowing in the crypto space are increasing, which draws regulators’ attention to impose interest on the digital assets.

Although the issue is still under discussion, the increasing number of lending platforms may encourage regulators to impose interest on digital assets. In addition, it would boot the movement of capital out of and into the market.  

Impact of interest rate on economy

In traditional financial markets, interest rate reflects the strength of an economy, its ability to recover and the trading volume in the domestic market. As a result, all economic aspects can be evaluated and an appropriate interest rate is set.

When an individual or company borrows from a bank, interest is paid along with the outstanding loan, and this is called ‘interest rate’.

In the case of cryptocurrencies, interest rate will motivate users to lend their holdings of digital assets in order to get higher returns.

Analysts confirmed that investors’ focus on interest will result in great benefits for them and the crypto industry in general. In addition, this step will boost liquidity in the market.

Data showed that nearly 0.01% of the total market capitalization was deployed in the market during the third quarter of 2019.

The average daily trading volume reached around $1.5 billion during the three-month period ending in September 2019.

Cryptocurrencies have been known for their sharp price fluctuations, and this is the most distinguishing feature of these assets that led several billionaires and celebrities, including Elon Musk CEO of Tesla to strongly criticize it.

Cryptolydian earlier reported Musk as making a suggestive tweet about Bitcoin that has set Twitter heads over heels. The innuendo-filled tweet gained thousands of likes and is still getting more by the minute.

He said:

“Bitcoin is *not* my safe word”

Musk often uses his Twitter to post both teasers and serious news about his projects or views. Perhaps this is why this tweet stirred his followers, but there is good reason to believe the tech-celebrity actually expresses admiration for the coin.

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Rabea Maguid 551 Articles
Rabea Maguid is a journalist completely obsessed with crypto industry. He holds B.A. from Al-Azhar University, and has a background in journalism and economics. Rabea Maguid likes to think about the future in a positive way, and sees blockchain as a potential driver of deep societal change.