How does the 1 day SOFR rate affect the interest rates of digital currencies?

1 answers

• Dec 19, 2021 · 3 years ago
  The 1 day SOFR rate is an important factor that affects the interest rates of digital currencies. As the SOFR rate represents the average overnight borrowing cost for financial institutions, it serves as a benchmark for determining the cost of funds for cryptocurrency exchanges and lending platforms. When the SOFR rate increases, it becomes more expensive for these platforms to borrow money, resulting in higher interest rates for digital currency loans and borrowing. Conversely, when the SOFR rate decreases, it becomes cheaper for platforms to borrow, leading to lower interest rates. This relationship between the SOFR rate and digital currency interest rates is crucial for investors and traders to monitor, as it can impact their borrowing costs and overall profitability in the digital currency market.
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