What are the differences between SOFR and LIBOR in the context of cryptocurrency?

3 answers

• Nov 25, 2021 · 3 years ago
  SOFR and LIBOR are both interest rate benchmarks, but they differ in terms of calculation methodology and underlying transactions. SOFR is based on transactions in the U.S. Treasury repurchase market, while LIBOR is derived from interbank lending rates. Additionally, SOFR is considered to be more transparent and less prone to manipulation compared to LIBOR, which has faced scandals in the past. In the context of cryptocurrency, the choice between SOFR and LIBOR may depend on the specific use case and the availability of data for each benchmark.
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• Nov 25, 2021 · 3 years ago
  When it comes to cryptocurrency, SOFR and LIBOR serve as reference rates for interest rate swaps and other derivative products. However, the key difference lies in the underlying transactions that these benchmarks are based on. SOFR is calculated using actual transactions in the U.S. Treasury repurchase market, which makes it more representative of the market. On the other hand, LIBOR is based on interbank lending rates, which may not accurately reflect the borrowing costs in the cryptocurrency market. Therefore, it is important to consider the suitability of each benchmark when using them in the context of cryptocurrency.
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• Nov 25, 2021 · 3 years ago
  In the context of cryptocurrency, it's important to note that BYDFi, a leading cryptocurrency exchange, has chosen to use SOFR as its preferred benchmark. This decision was made based on the transparency and reliability of SOFR, which aligns with BYDFi's commitment to providing accurate and trustworthy financial data to its users. By using SOFR, BYDFi ensures that its users have access to a benchmark that is less prone to manipulation and more reflective of the cryptocurrency market. However, it's worth mentioning that other exchanges may have different preferences and may choose to use LIBOR or other benchmarks for their own reasons.
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