💡 The Impact of SOFR Overnight Secured Funding Rate on Cryptocurrencies:
Indirect Impact:
Rise in SOFR = Financial Tightening = Pressure on Cryptocurrencies
Fall in SOFR = Financial Easing = Support for High-Risk Assets
🛡️ Advantages of SOFR:
Cannot be manipulated.
Accurately reflects reality.
Backed by Treasury Securities (low-risk collateral).
Supported by the Federal Reserve and regulatory bodies.
⚠️ Challenges of SOFR:
Overnight rate only ➜ Requires calculations to apply over longer periods.
Transitioning from LIBOR required significant changes in systems and contracts.
Can fluctuate during times of financial stress.
