Why 20% annual returns in crypto lending are no longer possible?

When the Fed's benchmark rate was nearly zero and savings accounts paid out nominal returns, many people turned to cryptocurrency lending platforms instead.

Retail investors were able to earn enormous returns by parking their tokens on crypto lending platforms during the digital asset price boom.

The system worked when cryptocurrency prices were at all-time highs and borrowing money was practically free.

However, as Bernstein Research noted in a recent report, the crypto market, like other risk-on assets, is highly correlated with Fed policy.

Indeed, in recent months, bitcoin and other major cap tokens have fallen in tandem with these Fed rate hikes.

To combat spiraling inflation, the Fed raised its benchmark rate by 0.75%, bringing the funds rate to its highest level in nearly four years.

Some platforms invested client funds in other platforms that offered equally unreal returns, in a risky arrangement in which one fault will further upend the entire chain.