I can borrow money for 5% no problem, buy 10000 Steem on some exchange and transfer it to my account. Why would I borrow at 28.6%? It doesn't make sense and it is irrational. Even people with bad credit can borrow at 22%. I'm trying to wrap my head around it, but it doesn't make sense to me.
If money isn't flowing into Steem when there is 26% guaranteed returns, then it spells trouble. I don't care about SP, RC, JSONs, Games, etc. We are talking about money here, it's fungible and convertable. This is a liquid currency that isn't attracting enough long-term buyers so the internal interest rate has sky-rocketed beyond common sense.
Just saying, it doesn't bode well.
Because you get the inflation value (ie upvote power) of the leased token which is quit significant. So it has to cover normal loan cost plus loss of token inflation for the owner which goes to the person taking the loan and holding the steem.
You are forgetting the main use case for Steem Power, that is to get resource credits to transact on the Steem chain, create accounts, etc.
There is more than only "upvotes" to Seem
True, but that was also true when the APR on lease was 14%. I'm trying to think why it's so high, are we in junk bond status?
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Actually it is around 20% for a long while. Now that Steem is cheaper it is cheaper for outsiders to lease Steem Power to have influence on the platform.
Hopefully the external market will realise this and flow money into Steem, I think the risk with borrowing in fiat is you owe it back in fiat so if Steem drops to 1/3 of it's value you are in a spot of trouble, with Steem Power leasing you aren't borrowing capital you are borrowing a delegation which gives you the same utility as if you had the capital, but leased at a fraction of the cost. This is more like leasing a car via AVIS than buying a car with a bank loan, not sure if that is a better way of putting it.
Basically it is the difference between having to pay capital and interest repayments vs only interest repayments (which is actually a fixed lease fee) and not being on the hook to repay the capital.
Also less paperwork and KYC.
"I think the risk with borrowing in fiat is you owe it back in fiat so if Steem drops to 1/3 of it's value you are in a spot of trouble"
And there you have it. All the other reasons where there when delegations were paying less than 20%. Perceived future value is why people aren't buying Steem with other currencies and getting 26%.
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Mostly people are bullish on BTC I agree, and dumping alts to ride the btc wave.