Most entities borrowing are borrowing crypto as part of their trading operations. For example, I could borrow crypto to provide margin for my HFT market making

Most entities borrowing are borrowing crypto as part of their trading operations. For example, I could borrow crypto to provide margin for my HFT market making strategies. A very popular use is to do rate/basis arb. So I borrow a crypto at say 10% interest and then use that to sell a future or swap that has a rate higher than 10%. So borrow at 10%, short a future with a annualized percent basis of 20%, and capture a risk free spread of 10%. Very sophisticated and institutional players are doing a lot of these kind of basis arb plays nowadays. It's pretty much free money. You need to be able to borrow though, as without leverage these rate arb strats don't yield compelling enough returns. If you're a crypto trading firm and not making at least 100% annualized, you're fucking up. It's not usual for sophisticated players to be making a 1-2% return a day in crypto. The wealth generation from crypto trading in the last two years is truly astonishing. Also want to note is that most of these obscenely high return strategies are delta neutral: they are unaffected by the price of crypto going up or down. There are some funds out there who's returns are derived from crypto exposure, but those are the shitty ones.