USD/USDT Interest Rate
What is the USD/USDT Interest Rate?
In addition to crypto-native features like perpetual contracts and funding rates, the crypto market also includes borrowing interest rates commonly seen in traditional finance. These rates are generated by spot borrowing activities on centralized exchanges. There are two key elements to analyze: the centralized exchange and the interest rate levels. Currently, the benchmark data comes from Binance, the world’s largest exchange, and Bitfinex, a long-standing platform renowned for lending activities.
● Binance
As the world’s largest exchange, Binance has a more diverse user base, with a relatively high proportion of retail traders. This composition often leads to more aggressive behavior during periods of price discovery or bull markets.
● Bitfinex
Bitfinex, one of the oldest exchanges, is characterized by its seasoned user base, often consisting of crypto-native whales. Observing Bitfinex’s borrowing interest rates can provide insights into how so-called “smart money” perceives current market conditions.
How to Use the USD/USDT Interest Rate
The USD/USDT Interest Rate is a highly cyclical indicator. Given the differing characteristics and user bases of the two exchanges, Binance’s borrowing behavior is viewed as representative of retail traders, while Bitfinex’s behavior reflects that of market movers.
Key observations:
When Bitfinex’s borrowing rate > Binance’s borrowing rate, it often signals a market bottom.
When Bitfinex’s borrowing rate < Binance’s borrowing rate, it often signals a market top.
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