Risks

Liquidity Risk: At times of high utilization, it may be difficult to withdraw funds immediately, as most liquidity is already borrowed.
Market Risk (Asset Depreciation): Lenders deposit crypto assets; if the market value of these assets drops significantly, the real return (in fiat terms) may decrease despite earning interest.
Variable Interest Rates: Lending yields are not fixed and may fluctuate based on borrowing demand. Lower demand results in lower returns.

Liquidation Risk: If the collateral value falls below the required maintenance margin, the borrower’s position may be liquidated, potentially at a loss.
High Interest Costs: During periods of high utilization, borrowing rates may increase sharply, making loans more expensive.
Collateral Volatility: Since most collateral is in volatile crypto assets, rapid price declines can quickly trigger margin calls and liquidations.
Over-Leverage Risk: Borrowing against volatile assets may amplify losses if the market moves unfavorably.

Last updated 18 days ago