I understand why the lender demands 20%. The economic problem is that the borrower has no conceivable use for the funds which could reasonably be expected to cover that yield (short of inventing the money out of thin air)
The other side of the trade is frequently a pump & dump. With that much borrowed capital, you frequently can exert noticeable market power on many thinly-traded cryptos. Push the price higher, consistently, wait till Reddit & Telegram pick up on the coin, then dump it on a greater fool at vastly inflated prices and use a portion of the proceeds to pay back the loan. Works great until there are no greater fools and the proceeds (which are often some stablecoin, or BTC/ETH) end up worthless too.
Before people shake their heads at how horrific crypto is, note that a good many leveraged buyouts operate on the same principle. Capitalist takes out a large loan at high interest rates, uses it to buy a company, company assumes the debt. Stripe mines company of assets & goodwill to goose the stock price. When the price is high, cash out and wait for shell of the company to implode under debt load, helped along by all the operational shortcuts that were taken to goose earnings.
