You made excellent points. My personal take on this is that Crypto offers higher yields because they are the 'riskier' investment. They can't offer the same rates as tradfi, since most will go for the safer investment. The higher yields will hopefully entice investors in spite of the higher risk. The other one, is that they need to offer higher yields because they are the "new player" in the scene. They are trying to get investors to move away from their current one, so offering something better is the best option. I have seen this with the new Digital banks in the Philippines. They offer up to 13 percent interest. This is compared to the 0.02 percent offered by banks, or 1 percent time deposit.