Yeah, guys. We're at an all time low now in USD swap rate. The effective compounded interest rate has never before been consecutively below 10 % p.a. for more than 24 hours. And we are still at +21 m in total swap amount. I am wondering whether new lenders are still moving into business at that rate. The adjusted risk is not worth it imho. It effectively costs me about 1 % of the original amount to get USD onto BFX. An investment I would recoup in 1 to 4 days when I started lending on BFX. Now it would take more than a month with the clear possibility of the rate dropping further to like 5 % p.a.. And there are other problems to consider as well: Not everybody in Bitcoinland comes from the US so exchanging your local currency into USD incurs significant risk of change in currency exchange rates against you which either needs to be hedged (more costs) or taken into account. While currency exchange risk is virtually nonexistent at interest rates of 50% to 370 % p.a. like we are used to 10 % p.a. in profit can easily be wiped out. The Euro for example dropped nearly that in the last 6 months relative to the dollar. Who is to say that this doesn't reverse eating all lending profits.
For the upside potential, well, if bitcoin doesn't reverse its downtrend heavily interest rates won't bump for quite some time or possibly ever and any bumps will probably be smoothed long-term as long as the retarded FRR feature is in place. There is also more and more competition that lets you trade on margin (less serious, secure and well-made than BFX though (yeah, I'm talking about these disgusting chinese futures bucketshops)) so the natural swap demand might continue to decrease even if the supply stays the same.

Just a fair warning to all potential liquidity providers. BTC swaps have gotten quite a bit more attractive though (more than double the USD rate at the moment with quite the possibility of the underlying asset to drop 5 % on a bad day though).

What you will seemingly always fail to realize is that the FRR arbitrarily decides where this race to the bottom starts because it builds an upper ceiling for the practically achievable rate. When we had the btcusd run-up to 470 6 weeks ago the swap offer orderbook was completely wiped out up to 1 % per day. The FRR that had previously given out millions for scraps (0.08 %) without scaling upwards a single bit because of the increasing demand then continued to shell out the lenders' money for scraps anyway barely adjusting to the vastly different market conditions. The FRR maximum was at like 0.13 % quickly dropping down to 0.09%.

Why in the world would I as a swap provider want an algorithm to lend out my money for 0.1 % when I could get 0.9 % at that time? What if the FRR which never rose beyond 0.13 % didn't pile up at 0.09 % (it only did so because of the faulty algorithm it uses) but at 0.6 %? Maybe then we would now be at 0.15 % and not at 0.03 % having wasted 90 % of our upward potential (0 % - 1 %).