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Why Do Institutions Give Out Interest-Like Payments For Your Bitcoin Deposits?

The only reason is that they’re making even more money by lending out your bitcoin to other people. But to whom and for what purpose?

Why Would Someone Want To Borrow Bitcoin?

Could they be depositing that bitcoin into another institution which pays even higher interest? That seems unlikely. Most firms reduce the amount you earn as your balance grows. Even if there were a gigachad club which pays higher interest rates than they offer to plebs, why would someone want to pay money to temporarily hold bitcoin?

Could they be using that bitcoin as collateral for a low interest rate loan on fiat? That also seems unlikely as they would need to pay interest on both loans, which would be higher than a pure fiat loan, plus they’d be exposing themselves to margin calls if the price of bitcoin were to dip.

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