From the Coinbase page about Lend: >Lend your crypto to earn 4% APY >Your principal is guaranteed This definitely seems fishy. I don't see how this is possible unless if their position isn't levered. However, if they aren't levered, then why can't they just lend USDC themselves?
Coinbase isn't making a return via leveraged treasury bonds or something. They are lending the money out presumably to crypto traders, DeFi schemes, etc. If someone thinks they they can make a 100% return on borrowed money, they absolutely should borrow at 10% (or whatever Coinbase's target is for their risk-adjusted cut after paying 4% to their not-investors). The whole space is so opaque and unregulated that it seems fairly clear that people with big accounts can, and do make market moving trades frequently.
You might ask, why would someone want to pay huge interest on stablecoins when money is so cheap to borrow from traditional finance now? Answer: the exchanges that do most of the action are offshore and probably nearly unbankable. FTX getting 1B of Tether several times in a week is business as usual for them (happened this past week), but its almost certainly impossible for them to get any Bank to do a 1B USD transfer without paperwork they cant provide.