#termmax @TermMax Risk Management and Fixed Rates vs. Smooth Interest Rates
Concept: The problem of unpredictability of floating rates (floating rates) in DeFi, and how fixed yields (Fixed-Rate Tokens — FT) enable building predictable investment models.
The biggest trap of most DeFi protocols for borrowers is a floating-rate APY. You take a loan at 3% per year, but during a sharp market spike the rate jumps to 40%, turning a yield strategy into liquidation.
In TermMax documentation, special attention is paid to Fixed-Rate Tokens (FT). The mechanism allows you to lock in the interest rate and the loan term in advance.
Why this matters:
1️⃣ Predictable PnL: You know exactly your costs or net profit from lending for the entire period.
2️⃣ Safety during volatility: Market jumps no longer change your interest rate.
3️⃣ Hedging flexibility: The ability to precisely calculate risks for large deposits.
For a retail investor, this means moving from “gambling with a floating rate” to predictable financial planning.
What do you choose for your deposits: a flexible floating rate or a fixed APY?
#TSFinance #FixedRate #CryptoLending #RiskManagement