{
  "id": 7413449,
  "title": "Q&A: Is decentralized finance truly independent from traditional markets?",
  "url": "https://urgent.news/2026/09/14/q-a-is-decentralized-finance-truly-independent-from-traditional",
  "topic": "finance",
  "section": "Finance & Markets",
  "published": "2026-09-14T22:40:04.000Z",
  "source": {
    "name": "Phys.org",
    "slug": "phys-org",
    "url": "https://phys.org/news/2026-09-qa-decentralized-independent-traditional.html"
  },
  "original_language": "en",
  "account": "Decentralized finance (DeFi) allows people to borrow and lend digital assets without involving traditional financial institutions like banks. Instead, transactions are managed through computer programs known as smart contracts that run on a blockchain, a shared ledger maintained by many computers simultaneously. This market operates like a marketplace with pools of digital assets, where some users deposit assets to earn interest, while others borrow from these pools and pay interest. In contrast to a regular bank loan, DeFi borrowing requires borrowers to deposit cryptocurrency worth more than the borrowed amount as collateral. If the collateral falls close to the borrowed amount plus accrued interest, the software automatically sells it to repay the loan.\n\nA recent analysis by Siddharth Bhambhwani, an assistant clinical professor of accounting at Penn State's Smeal College of Business, reveals that traditional and decentralized markets are more connected than they appear. Bhambhwani compared borrowing and deposit rates from Aave, a popular DeFi platform, to U.S. Treasury yields between January 2023 and March 2026. He discovered that U.S. Treasury yields significantly influence rates in cryptocurrency lending markets, despite the lack of a direct link between the two markets.\n\nTypically, the interest rates on stablecoins in DeFi markets move systematically with U.S. Treasury yields. When Treasury yields rise, stablecoin borrowing and deposit rates also tend to increase. For every quarter-percentage-point move in the U.S. 10-year yield, stablecoin borrowing rates move about one percentage point. This connection is strong, though indirectly, as stablecoin depositors can compare holding a token and earning the DeFi rate versus holding Treasury securities and earning the Treasury rate. When the opportunity to invest elsewhere changes, capital shifts, utilization alters, and DeFi rates adjust, even though the protocol's code does not reference the Treasury market. However, this connection is not observed for volatile crypto assets like Bitcoin and Ethereum, as users primarily focus on their expected return rather than comparing it to traditional Treasury yields.",
  "summary": "With the rise in popularity of the digital assets known as cryptocurrencies over the last decade, the idea of a decentralized financial system that operates outside traditional markets is gaining mainstream appeal. A new analysis from a Penn State researcher, however, suggests that traditional and decentralized markets are more connected than they might seem.",
  "key_points": [],
  "editors_take": null,
  "illustration": null,
  "coverage": {
    "outlets": 1,
    "also_reported_by": []
  },
  "ai_generated": true,
  "disclaimer": "Summaries, key points and the editor’s take are written by software from other outlets’ reporting and may contain errors — always check the linked original."
}