What you might want to take into account is the opportunity costs. As a lender, the money you have at BFX are "stuck" there, compared to let's say an FX platform where you can trade any of the many, many pairs or CFDs. With BFX you have a binary choice: lend at the prevailing market rates or don't lend at all. As such, in the short term, the logical (and financially optimal strategy) is to always lend your money, even at very very low rates. 1$ pe day is better than no dollar at all.

Sure, some people will kid themselves that instead of lending at 0.05%/day it's better to wait for a few days and then lend at 0.2%/day. You do the math and see that you can wait up to 4 days without lending and you'll still do the same benefit (actually a bit less if you're compounding). But, that is speculation on the interest rate movement so an identical behavior to trading, and something that i would venture to assume lenders don't want to do as a principle (otherwise it makes more sense to just trade on margin with your funds).

Yes, in the long term, if rates drop dramatically, the lenders will pull out their money and move them somewhere else. But, for the money that are in BFX at any point in time, the optimal financial strategy is to lend them out at whatever rate you can. Thus the reason for "auto lend" option and the prevailing use of the Flash Rate rate to auto-lend the money on a recurring basis.

If you take all that i've said before into consideration, you will see why very low lending rates are possible and even probable, and such a situation can only improve/reverse if BFX takes active steps in limiting the minimum rate.


But i would worry less on the above and more on the fact that the lending cost is being hiked by 50% whenever desired....curious how many of the lenders did the math on that one. Not that it matters anyways