Are There Interest Rate Markets For Bitcoin?

Is there an interest rate market for Bitcoin? Futures contracts in the mining industry to protect against price volatility. Investment funds with rate of returns. We don't yet have the mature mechanism to carefully and quickly discover the future market value in this economy.

Fiat currencies have markets which reflects time value of money which are interest rates markets. How about the bitcoin, or another cryptocurrency, are you aware of interest rate types of markets for bitcoin and other cryptocurrencies?

Yes, there are interest rate markets for bitcoin. They are here for long time, you could not see them that often simply because a lot of these markets are over-the-counter. Of you’re in the bitcoin mining industry, and you’re going to have a steady stream of bitcoins that you don’t know what its value is going to be, and you have bitcoin now, you may want to have various contracts, futures contracts, to protect yourself against volatility.

And out of these futures contracts what emerges, is various forms of interest payments.

But that would be the market that represent some other currencies, not with bitcoin itself you may note, and you would be right.

I do not know if there are now, but there were actually some investment funds that invest funds that are in bitcoin, into companies, directly in bitcoin and presumably generate returns in bitcoin. These investment vehicles pay some kind of rate of return in bitcoin and therefore those represent interest rates.

Now every major exchange has future contracts with major cryptocurrencies, and explosion of DEFI experiments in 2020 brought many smart contracts that we can call interest rates for bitcoin and other cryptocurrencies in general.

But I want to note here something that is maybe not that obvious. And that is that…

future value of money doesn’t change if you change the currency. It still exists as an economic concept. Nothing changes. What we don’t have yet is the mechanism to carefully and quickly discover the correct market price for the future value of money in this economy. You’ll see that mature.

If you remember in the beginning of Bitcoin, we didn’t have even a market mechanism to discover what the price of bitcoin was. But did it have value? How much do you want for two pizzas? I don’t know… 10,000 Bitcoin each? Sure. That was March 2010.

About the author

Satoshi Nakamoto

We developed bitcoin.

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