#OnChainLendingSurge

The on-chain lending market is currently experiencing a major boom, with the total active loans exceeding $20 billion, a new record. This type of lending relies on decentralized platforms such as Aave and Compound, which allow people to borrow and invest using digital currencies as collateral.

When lending increases in this way, this can affect price inflation in many ways.

When people borrow currencies and use them for investment or trading, this increases liquidity in the market. High liquidity can push prices up, especially if there is strong demand for the currencies.

Borrowing always comes with great risks, especially if the market is volatile like now. If there is a collapse in prices, a large wave of liquidations may occur, and this may negatively affect the market. Many people use loans to invest in emerging currencies or new projects. This creates a kind of "bubble" because prices depend more on speculation than real value. Lending is driven by interest rates set by platforms. If the interest rates increase significantly, this may encourage people to borrow more, which also increases inflationary pressure on currencies.