All this talk of a FRR wall causing the rates to decline always strikes me as very silly. Why does the wall exist? It is because there is excess supply due to swap rates being 2-10 times higher than the market rate, and due to friction costs of moving money in and out of Bitfinex.
I think the FRR wall isn't suppressing interest rates - in fact it is preventing them from falling fast enough to balance supply and demand. This was especially noticeable with the long decline from 0.1% to 0.04%. The 4 million FRR wall was a product of declining demand (due to the bear market), excessive supply,and a FRR rate that was too high.
I think that both of these are right. The key issue with the FRR is not that a lot of money sits there. It is that it adjusts too sluggishly. So it does keep the rate lower when it is rising, and keeps it higher when falling. We are mainly focusing now on how to make it more agile, because we still think it is a useful tool, I also really appreciate someone mentioning that if there is a wall, that must logically mean that there is an excess of supply and rates should be lower. If there was demand at that level, there would not be a wall. I am somewhat curious about the price sensitivity of the margin traders and I wish I knew more about how many people would actually not place a trade because they don't like the swap rate.
This is an interesting discussion, and I am still listening to anyone else's thoughts.
-Josh