Crypto bank high interest rate

[maizefolk]

Not just institutions.  I borrowed tether to leverage up for a few weeks, and am paying about 50% APR. 0.15% Daily.  About $90 day/BTC.

Did you have to post collateral? If so, how did it work?

[SuperSecretName]

Not just institutions.  I borrowed tether to leverage up for a few weeks, and am paying about 50% APR. 0.15% Daily.  About $90 day/BTC.

Did you have to post collateral? If so, how did it work?

Yeah.  It's on an exchange, so the borrowing and the repay are integrated into the order book.  Can go max 5x leverage (so borrow 4 for every 1)  Not good long-term, but great for high-conviction moves.

Interestingly, borrowing BTC to short is 90% cheaper at .01% daily.

[joe189man]

how are these crypto banks working out for you guys?

[HeadedWest2029]

So far so good as a retail investor. Although they had a pretty embarrassing botched promotion https://www.coindesk.com/blockfi-botched-promo-payments-april-confusion
Luckily it looks like they limited the loss to less than $10 million (could be much less now).  The risk will always be security hack, poor lending practices, or just plain screwups that threaten their solvency. It sounds like they're doing another investing round for $5 billion so that pads their books further. They almost have to I'd imagine with how quickly they are growing. Average retail account balance has grown from $10k to $50k. 

[Dgmp]

I got nervous with the big drop in bitcoin and took my 50k stablecoin balance down to 20k and took 30k In cash back to my checking account.  Withdrew no problem.

I’d like to get back in higher after a few more months to rule out the chance that the crypto cut in half price caused financial problems for them.

They did some really high July APR promotions that made me a bit nervous.

[Icecreamarsenal]

So far so good.  I withdrew my entire balance of $50k to test, was transferred with no issues.  I'm back in.

[HeadedWest2029]

As BlockFi customers learned recently, rates will be reduced in July.  I expected rates for crypto interest accounts to go down over time, so I'm not sweating it.  Nonetheless, I'm dusting off my earlier research to get a list of available options.  I'm thinking about splitting my stablecoins into 2 (or more) accounts now. 

Here's my list of CeFi companies, with interest rates for stablecoins.  Definitely not recommendations, just getting a lay of the land in my research.

BlockFi (US Based) - https://blockfi.com/crypto-interest-account - Starting in July, 7.5% interest for the first $50k, then 5% after that.
Gemini (US) - https://www.gemini.com/earn - 7.4% APY
Nexo (Switzerland) - https://nexo.io/earn-crypto - 10% interest (or 12% APY if you want to get paid in their shitcoin token).
Celsius (UK) - https://celsius.network/earn-rewards-on-your-crypto - 8.88% APY
Voyager (US) - https://rewards.investvoyager.com/interest/ - 9% APY

Other
Peer-to-peer staking @ KuCoin (Hong Kong), interest varies wildly - https://www.kucoin.com/margin/lend

DeFi Staking Platforms (rates always changing).  I'm still learning more about DeFi.  Rates suck currently.
AAVE - https://aave.com/
Compound- https://compound.finance/markets

Anything obvious I've missed?  Does anyone here have accounts elsewhere they recommend (especially Nexo or Celsius)?  I think my top BlockFi alternative will be Gemini because it's US based, audited, already the primary custodian for BlockFi, and I trust their security.  Voyager is also intriguing because it's a US company, but I don't know a lot about them. 

[Juan Ponce de León]

Plenty of ways to get 30-50% PA on stablecoins in defi

[Rosy]

Here is an interesting one called Ledn. Based in Toronto, Canada, insured with BitGo and backed by Genesis.
https://ledn.io/en

They offer "Financial services for hodlers of digital assets".
Their entire focus is on Bitcoin and USDC only.
In essence, Ledn is a savings and lending platform.
Right now, you can earn up to 6.10% on your bitcoin and up to 11% interest (paid monthly) on your USDC through saving and lending options on their platform.

This up-to-date list of reviews includes Ledn.
https://thecollegeinvestor.com/21245/top-10-bitcoin-crypto-investing-sites/
Still slogging my way through all of them because I am looking for a second exchange for buying altcoins (fun money only) in the future. 

What really made my eyes pop about Ledn is their outrageous B2X service to double your bitcoin.
How is that even possible?

Note: The US has B2X service-related restrictions but nevertheless US residents can definitely use this service.
From what I can tell it basically means if they margin call or you close out the B2X loan then US residents will pay the remaining balance if any in US dollars instead of Bitcoin.

So what do you think about this B2X program on the Ledn platform?
It looks like even if you did not double your money you could still benefit but only if the price of bitcoin doesn't drop below the price it was when you started the loan?
Although it may average out in your favor given the constant ups and downs of the BTC price while you hold the loan.
Is it only a wild bet or can it work in your favor mathematically?

Thanks for the list @HeadedWest2029
I like both Gemini and BlockFI for simplicity, security and convenience but they are rather conservative in their coin listings and features if you can apply that term to crypto:).

Aave and bitcoin
Since I discovered that Aave lets you retain control of your keys - wow - while your bitcoins earn interest.
They now have my undivided attention.
Aave might just be my first foray into true de-fi. I'm holding off until I come across a good step-by-step visual to help me navigate it all correctly.
Any tips and links appreciated - for now I'm just reading up like crazy.

youtube has been difficult to navigate for solid crypto information.
Two of my favorites are the Coinbureau and the MoneyZG channel, both worth a look.

Interesting - you might enjoy watching this one.
For those who still trust the banks and like to cry 'tulip bulbs' and for everyone who enjoys a good bank bash.
Here is a great youtube video about one of crypto hating J.P. Morgan's latest shenanigans

AVOID THIS CRYPTO INVESTMENT from J.P. Morgan  - LOL
https://www.youtube.com/watch?v=7JnGDUDDLNM&list=PLXbLiQD5YgHCrWunH-F7iCVzXb2j1famu&index=26

[Rosy]

Plenty of ways to get 30-50% PA on stablecoins in defi

@Juan Ponce de León
That does sound too good to be true but I have seen a few 28% to 30% mentioned on doctorofcredit that were the same process as BlockFi APY on stable coins which turned out to be legit but short-term like six months then they dropped the interest rate.
So tell us what are the risks, how does it work, what do we need to know - stipulations?
How involved, what timeline, is it all done on just an app with a shield...

[BattlaP]

I know this is not a thread for skeptics, but crypto relies entirely on new money entering the system so every thread should have a regular dose of rationality.

So far so good.  I withdrew my entire balance of $50k to test, was transferred with no issues.  I'm back in.

When the shit hits the fan, withdrawals are the first thing to shut down. There are countless examples of this happening every time there is a sudden downturn in the crypto market.

Plenty of ways to get 30-50% PA on stablecoins in defi

These are not realistic returns. Either massive risk or outright fraud. Just because you can deposit and withdraw your money when times are good, does not mean that the underlying system is stable or legitimate. If you are just an end user of these systems, you don't know what is going on behind the scenes, no matter how many Youtubes, websites, interviews you read and watch.

Look after your money, people. You don't need to get rich quick.

[PDXTabs]

BlockFi APY on stable coins which turned out to be legit but short-term like six months then they dropped the interest rate

Yea, BlockFi is loaning out coins to third parties for arbitrage AFAIK, so the return they get is entirely based on how much they can loan it out for. In the long run it seems like that cost should come down, along with your APY.

[HeadedWest2029]

Pretty decent writeup here on comparing various crypto interest companies https://prohashing.com/guides/earning-interest-on-cryptocurrencies
There were a few statements in there that I don't think are true and I don't always agree with the conclusions, but helpful nonetheless.

[CrankAddict]

This seemed like a relevant topic to revive versus starting a new one... I have not been able to find anything which describes risks associated with putting money in GUSD.  The coins are guaranteed to equal USD.  They are backed by real dollars in FDIC insured accounts.  I have zero desire to own any crypto.  However, a 7% savings account sounds pretty good.  But not at the risk of losing money.  Am I missing something?

[Telecaster]

This seemed like a relevant topic to revive versus starting a new one... I have not been able to find anything which describes risks associated with putting money in GUSD.  The coins are guaranteed to equal USD.  They are backed by real dollars in FDIC insured accounts.  I have zero desire to own any crypto.  However, a 7% savings account sounds pretty good.  But not at the risk of losing money.  Am I missing something?

I don't know about the risks with GUSD specifically, but here are some risks in general:  The way this works is the cryptoplatform borrows coins from you, paying you interest in exchange, and loans the coins out to others collecting even a higher interest rate.  This is how traditional banking works, too.  But note, your coins aren't being held by the platform, they are being held by whoever they loaned them out to. 

What has happened many times in the history of banking is the depositors will panic--sometimes for no reason--and make a run on the bank.  Since the bank doesn't have the money, it collapses.   And since banks loan money to each other, a single bank failure can cause multiple bank failures.  Avoiding panic is the primary reason why FDIC insurance was created, along with audits, reserve requirements, etc. after a third of the banking system collapsed in the Great Depression. 

You're betting that 1) that whoever is running the platform is legit 2) competent, and 3) there won't a future plunge in crypto prices or other event that causes panic withdrawals. 

[jim555]

Anything promising you super high interest rates has to be a Ponzi scheme.  If it is too good to be true, it is.

[CrankAddict]

I don't know about the risks with GUSD specifically, but here are some risks in general:  The way this works is the cryptoplatform borrows coins from you, paying you interest in exchange, and loans the coins out to others collecting even a higher interest rate.  This is how traditional banking works, too.  But note, your coins aren't being held by the platform, they are being held by whoever they loaned them out to. 

What has happened many times in the history of banking is the depositors will panic--sometimes for no reason--and make a run on the bank.  Since the bank doesn't have the money, it collapses.   And since banks loan money to each other, a single bank failure can cause multiple bank failures.  Avoiding panic is the primary reason why FDIC insurance was created, along with audits, reserve requirements, etc. after a third of the banking system collapsed in the Great Depression. 

You're betting that 1) that whoever is running the platform is legit 2) competent, and 3) there won't a future plunge in crypto prices or other event that causes panic withdrawals.

Right and that's why I wouldn't touch something like this (Gemini Earn for example) that was based on loaning out my random crypto.  But if my only holding is the GUSD coin, which is forever locked 1:1 to the USD, it seems to eliminate those plunge/panic scenarios doesn't it?  Further, to your first point, Gemini seems to be regulated and audited by real banking authorities so it wouldn't seem like the "two brothers running off in the middle of the night" scenario is real likely.  That's all based on what I read here, which of course is coming from Gemini itself, but seems legit...  https://www.gemini.com/cryptopedia/gusd-stablecoin-gemini-dollar

[maizefolk]

Right and that's why I wouldn't touch something like this (Gemini Earn for example) that was based on loaning out my random crypto.  But if my only holding is the GUSD coin, which is forever locked 1:1 to the USD, it seems to eliminate those plunge/panic scenarios doesn't it?

In answer to your first question, no not really. Just because GUSD is locked at 1:1 relative to the USD doesn't help you if the organization you deposited your money with doesn't have enough GUSD to make good on your deposits when you try to withdraw them.

While there are lots of ways they can try to mitigate the risk (requiring collateral, only loaning to trusted customers), any business model which takes deposits from one group of people and then loans those deposits out to other people in return for interest has counterparts risk.

This isn't some fundamental difference between cryptocurrency and fiat. Consider the Great Depression where the value of the dollar actually increased (as a result of deflation) but many people lost a lot of money when the (legitimate and audited) banks they'd deposited their dollars in didn't have enough money to honor requests for withdrawals.

[CrankAddict]

In answer to your first question, no not really. Just because GUSD is locked at 1:1 relative to the USD doesn't help you if the organization you deposited your money with doesn't have enough GUSD to make good on your deposits when you try to withdraw them.

While there are lots of ways they can try to mitigate the risk (requiring collateral, only loaning to trusted customers), any business model which takes deposits from one group of people and then loans those deposits out to other people in return for interest has counterparts risk.

This isn't some fundamental difference between cryptocurrency and fiat. Consider the Great Depression where the value of the dollar actually increased (as a result of deflation) but many people lost a lot of money when the (legitimate and audited) banks they'd deposited their dollars in didn't have enough money to honor requests for withdrawals.

So you may be right, but please help me understand the details here.  If for every 1 GUSD I buy (costing me $1) Gemini puts that $1 into a real FDIC insured bank account, and whenever I sell a GUSD they take that dollar back out to repay me, then what is the sequence that would lead to me not being able to get my money back?  Gemini says "GUSD is audited on a monthly basis by BPM, a private and independent accounting firm that ensures there is parity between the amount of USD in reserve and the amount of GUSD in circulation".   So I'm unclear on how there could not be enough money to pay back out.  That would require giving out 2 GUSD coins for only 1 USD deposited, wouldn't it?

[maizefolk]

It sounds like Gemini may actually be playing two different roles here, so it's helpful to split them apart to follow what's going on:

Gemini is an issuer of GUSD. If someone wants GUSD they can do one of two things: 1) Buy it on an exchange from someone who already has some at the market rate. 2) Go to Gemini who will always create and sell them new GUSD at the same price of $1/unit. Similarly if someone wants to see GUSD, they can do so on an exchange at the market rate, or they can go to Gemini and Gemini will always buy GUSD at the same price of $1/unit. Because the second option exists, the price on exchanges will always state at ~$1 per GUSD, because if it gets above that, big players will pay a bunch of dollars to Gemini to buy brand new GUSD at $1/unit and then sell it at the market price >$1/unit, pocketing the profit, and if the price on the exchange goes below $1/GUSD, those same people will buy a lot at the market price <$1/unit, turn around and sell the GUSD to Gemini at $1/unit, and pocket the profit. Since Gemini gets a dollar every time they create a new GUSD, they will always have money to buy any GUSD someone wants to sell (assuming no funny business anyway, that's where the auditing comes in).

Gemini is a bank or bank like substance. You can deposit your GUSD with Gemini (or other similar new businesses). You give your GUSD to Gemini. They loan those GUSD to other people who need them. Those people pay Gemini extra money (interest) for the loan. And Gemini uses some of the money they get from people who borrow money from them to pay interest to the people who have deposited money with them. Like any bank, most of the GUSD Gemini has on deposit is actually lent out to other people earning interest.

So the sequence of events where you'd lose money looks like this. You buy from GUSD from Gemini the issuer. You deposit that GUSD with Gemini the bank. Gemini the bank mixes your GUSD with all the other people's who have deposits with them and lends the GUSD to someone(s). A bunch of the people Gemini-the-bank has lent money to cannot pay Gemini-the-bank back. Now Gemini the bank is insolvent. You come and ask for your money and they say "we don't have it" or "we only have 85% of it" or "withdrawals are temporarily closed".

Gemini-the-issuer still has one USD for every GUSD in circulation. But since you lent your GUSD to Gemini-the-bank, and Gemini-the-bank lent your money to a borrower, who in turn probably spent their GUSD with some third party and so on and now it's gone. Since you don't actually have any GUSD Gemini-the-issuer cannot use their dollars to pay you back for your deposits with Gemini-the-bank, because giving you dollars without getting GUSD in return would mean they'd have to break the 1:1 ratio of circulating GUSD to dollars on deposit that they need to maintain.

[DaKini]

Am I missing something?

Search the internet for "TITAN" and "IRON".

That was a "stablecoin" that was "pegged to the USD" and "physically backed".
And went to $0 last week or so.

[HeadedWest2029]

IRON was a DeFi algorithmic stablecoin, which is much different than GUSD which is backed 1-1 by dollars in a New York bank.  Gemini is audited for their USD reserves by an independent registered accounting firm, BPM LLP and they pass SOC 2 security compliance.  Gemini chose to go the highly regulated route in the crypto world.  Compare that to the DeFi algorithmic / pegged route and we're talking apples and oranges. 

[HeadedWest2029]

Regarding Gemini Earn, what you need to understand is you're lending to one company basically.  As of right now, Gemini partner exclusively with Genesis (easy to confuse Gemini / Genesis, but we're talking two different companies completely).  Gemini has said they plan on partnering with other companies, but for right now you're hitching your wagon to the solvency of Genesis.  Now, also important to note, Genesis is massive.  They're basically the de facto prime broker of the crypto space and facilitate billions of crypto trades monthly.  Gemini also audits Genesis (quarterly I believe) to ensure their loans are overcollateralized.  And Genesis is also a highly regulated New York business (see compliance on their about page https://genesistrading.com/about/).   

So it is a single point of failure currently.  Also, I have some money in Genesis Earn and feel comfortable with the risk / reward with a small portion of my overall AA.

[DaKini]

which is much different than GUSD which is backed 1-1 by dollars in a New York bank

That's what they promised too. At first.
After some guys poked around, they had to admit, that thats not entirley backed by real dollars. After poking some more, they had to admit that the majority are not real dollars, but paper assets. And those, as we now know, turned out to not be able to withold the decline.
The result is history.

So I would be very cautious.
Especially  because of this:

Gemini also audits Genesis

Well, thats the same as my son auditing my doughter. I only get to see what they want me to see.

[HeadedWest2029]

Well, thats the same as my son auditing my doughter. I only get to see what they want me to see.

well, you might not trust that, but perhaps the SEC
https://sec.report/CIK/0001336973

[CrankAddict]

Thanks maizefolk and others for the responses.  I think I mostly understand the situation now.  What still seems a bit hard to grasp is the specific APR they are able to offer (7.x%).  If the thing they are loaning out is essentially just a dollar, with no capacity for wild growth or anything like that, why is somebody going to pay more than 7.x% (presumably Gemini makes money) to borrow it when regular bank money is so cheap?  When I think of a party paying a high rate to borrow money I typically think this only applies to those who have no other options - i.e. bad credit, etc.  Are there any guidelines/descriptions/etc on who exactly would be borrowing my GUSD from Gemini?

[Juan Ponce de León]

This is why for my stablecoin stash I go for 30-70% PA using defi smart contracts rather than 7%.  It's all about the risk:reward ratio for me.

[HeadedWest2029]

Are there any guidelines/descriptions/etc on who exactly would be borrowing my GUSD from Gemini?

Genesis - see my post right above this

I'd recommend going back to the beginning of the thread. 
The same thing applies to BlockFi, Gemini (really, Genesis), Voyager, Celsius, Nexo.
They offer 7.4% interest because the people borrowing, AKA hedge funds involved in the crypto space
A) can make more than 7.4% in the crypto markets, often in a market neutral way (exchange arbitrage price differences, and historically the difference between spot & futures)
B) the normal source of funding is prime brokers, and prime brokers are typically not servicing the crypto markets yet.

Whether those opportunities for arbitrage continue to exist as the market matures, your guess is as good as mine.
The CEO / CFO of BlockFi have been on tons of podcasts and YouTube sessions where this is all discussed.  I provided links to these resources earlier in the thread.  I did a TON of research before dipping my toe and only put in an amount you're comfortable putting at risk.

[HeadedWest2029]

This is why for my stablecoin stash I go for 30-70% PA using defi smart contracts rather than 7%.  It's all about the risk:reward ratio for me.

Are you going to keep posting these rates without saying HOW this is possible?  I've seen algo DeFi stuff like the Terra Anchor protocol giving a "stable" 20% APY.  I've seen staking on KuCoin reach 30% for short term loans, but have since went down a ton.  Anything offer 70% feels like an outrageous liquidity pool rug pull waiting to happen.

[Juan Ponce de León]

This is why for my stablecoin stash I go for 30-70% PA using defi smart contracts rather than 7%.  It's all about the risk:reward ratio for me.]This is why for my stablecoin stash I go for 30-70% PA using defi smart contracts rather than 7%.  It's all about the risk:reward ratio for me.

Are you going to keep posting these rates without saying HOW this is possible?  I've seen algo DeFi stuff like the Terra Anchor protocol giving a "stable" 20% APY.  I've seen staking on KuCoin reach 30% for short term loans, but have since went down a ton.  Anything offer 70% feels like an outrageous liquidity pool rug pull waiting to happen.

I don't bother with crypto specifics on this forum because it's an extremely anti-crypto, conservative crowd here.  It wouldn't matter what I actually type because the replies are just 'tulips' and 'greater fool' 'backed by nothing' etc etc.  I'm not obligated to teach people to invest in crypto and nor do I care if they do or don't.  One thing I will say is what I like about these smart contracts is once they are set up the human element is very minimal.  If the code in the contract is legit it will remain on the blockchain forever, even if the website you use to operate it disappears or goes down you can still access the contract directly using blockchain tools and claim your yields or withdraw your money.  It's a much different element of risk to the centralised offerings and I seem to like it.

By the way, I didn't say these options were without risk.  My point was if I'm going to risk it, and just being in crypto and doing transfers and using wallets is a risk in itself, If I'm going to risk it I want the reward to be worth the risk.  7% to me isn't enough to reward to even justify bothering being in the space, it has to be higher.

[HeadedWest2029]

No judgement.  And I get the reticence to share.  I totally agree the folks in these forums completely shut down their brain sometimes with even the mention of crypto.  I was just curious if there is an easy to follow playbook for what you're doing?  For example, I stake this token on this platform / exchange </end>
I've honestly just never heard of 70%, even in the wild west of DeFi.  And some of these DeFi protocols are hilariously difficult to fund.  Like, you have to jump through various exchanges and swaps just to make your way into it.  I understand your logic.  I don't come to the same conclusion.  But I understand it

[maizefolk]

I think I mostly understand the situation now.  What still seems a bit hard to grasp is the specific APR they are able to offer (7.x%).  If the thing they are loaning out is essentially just a dollar, with no capacity for wild growth or anything like that, why is somebody going to pay more than 7.x% (presumably Gemini makes money) to borrow it when regular bank money is so cheap?  When I think of a party paying a high rate to borrow money I typically think this only applies to those who have no other options - i.e. bad credit, etc.  Are there any guidelines/descriptions/etc on who exactly would be borrowing my GUSD from Gemini?

HeadedWest2029 and I had a discussion on exactly this same question back in March in this same thread, so it may be worth reading through posts #41-46.

My TL;DR summary of the take away from that discussion is that the places hedge funds normally borrow from (big prime brokers with giant piles are capital) aren't willing to lend them money for trading in cryptos, so the same hedge funds are willing to pay higher interest rates to borrow from the relatively small pool of capital which is willing to lend for these purposes.

This suggests to me the high interest rates on stable coins are a relatively temporary phenomenon. Either the system blows up at some point, or as stablecoin lending establishes a longer track record of NOT blowing up more larger pools of capital will move into the lending-to-funds-running-crypto-trading-strategies market, and as supply goes up the interest rate premium will decline.

[Rosy]

SEE PAGE ONE OF THIS THREAD FOR AD NAUSEUM DISCUSSION OF ALL THE DETAILS ON HOW AND WHY GENUINE HIGHER APY IS POSSIBLE AND THE RISKS INVOLVED.
Nothing has changed since then. The process is the same and the potential for risk is the same.

which is much different than GUSD which is backed 1-1 by dollars in a New York bank

That's what they promised too. At first.
After some guys poked around, they had to admit, that thats not entirley backed by real dollars. After poking some more, they had to admit that the majority are not real dollars, but paper assets. And those, as we now know, turned out to not be able to withold the decline.
The result is history.

So I would be very cautious.
Especially  because of this:

Gemini also audits Genesis

Well, thats the same as my son auditing my doughter. I only get to see what they want me to see.

NO - I know this is confusing territory but fact is that @HeadedWest2029 is correct in pointing out the differences.

YES, in theory - all stable coins should be created equal and be backed by the US $ 1:1.

1. The fact is that ALGORITHM-based stable coins - a more recent development in the crypto world - are turning out to be problematic under certain conditions. They have proven to become unstable under intense pressure. Terra Luna is one such coin - but the creators/developers/backers stepped in when there was a hiccup - nothing happened.
There was enough capital and a business team committed to the success of all of their ventures. Terra Luna is a payment platform like Apple Pay.

2. TETHER or USDT is the elephant in the room. The most popular Stable Coin in the world.
The guys who poked around - were the SEC regulators in the US who filed criminal charges, took them to court and slapped them with a fine.
What they found
- $850Billion cash had been temporarily removed to earn yield elsewhere (like a 3-mo CD) and further digging showed that there were also some paper investments - clearly not a liquid asset pool of US$.
Officially Tether now holds true 1:1 and is being audited on a regular basis.

The people behind USDT have not changed, they are smart money people who will do whatever fills 'their' already deep pockets, the hell with the small fry investors. That is the reason I'm not ever buying USDT.

3. GEMINI - GUSD - Their coin is backed 1:1 and audited on a regular basis. In fact, Gemini backed by Genesis were the ones who stabilized exchanges like Coinbase (the largest in the US) during the recent 50% crash. They were never down at all unlike Robinhood, Binance, Coinbase to name a few of the biggest in the industry.
They are solid, have never been hacked (yet) and while not the biggest, definitely as trustworthy as it gets.

Gemini is all about regulation and staying a centralized exchange platform as they gear up for eventual approval to be traded on the stock exchange.

One final observation on this subject:
CRYPTO is the only financial sector IN THE ENTIRE WORLD that is required to show a true 1:1 reserve.
NONE of our banks - none of our financial institutions - none of our insurance companies - are required to keep a 100% backup/reserve.

[maizefolk]

One final observation on this subject:
CRYPTO is the only financial sector IN THE ENTIRE WORLD that is required to show a true 1:1 reserve.
NONE of our banks - none of our financial institutions - none of our insurance companies - are required to keep a 100% backup/reserve.

In fairness, no one REQUIRES crypto to maintain a 1:1 reserve. Only that if a company advertises their coin as having 1:1 backing that this is, in fact, true.

No legal requirement would stop a company from offering a stable coin with only 50% or 25% backing in cash and the remainder in less liquid assets, or even a true fractional reserve stable coin cryptocurrency which issues several times more coins than they have finances to honor redemption requests. It's not clear to me that such a cryptocurrency would find much market demand at the moment, but it could be done.

It is a question of 1) truth in advertising & 2) what there is demand for in the crypto space, not some special legal requirement for cryptocurrencies.

[Rosy]

You have a point there maize - led me to this interesting document:
https://www.cliffordchance.com/content/dam/cliffordchance/briefings/2019/09/stablecoins-a-global-overview-of-regulatory-requirements-in-asia-pacific-europe-the-uae-and-the-us.pdf
STABLECOINS: A global overview of regulatory requirements in Asia Pacific, Europe, the UAE and the US

Fwiw I had a career in commercial insurance underwriting and it would always tick me off no end to hear people pick their insurance based strictly on the cheapest price with some random fly-by-night insurance. We had a small insurance company set up shop locally which promptly went bankrupt when the first hurricane hit.
Why? Not enough reserves.

Worse - among other things the state of Florida had allowed the insurance companies to lower the reserves to ridiculous levels. The power of big industries and their lobbyists - we, the people pay the price. So yeah, I am a huge proponent of having enough reserves to deal with any black swan event.
As a global reinsurance underwriter, I might have to find three reinsurers for say, the German operations of a global company like Coca-Cola.

The point is that we never have true transparency. No business, bank or crypto is going to tell us all that happens behind closed doors, business contracts and obligations are not made accessible if it makes the company vulnerable to the competition or reveals 'secret' business connections. (The law can subpoena the documents but they will most likely not be made available to the public).

[Telecaster]

One final observation on this subject:
CRYPTO is the only financial sector IN THE ENTIRE WORLD that is required to show a true 1:1 reserve.
NONE of our banks - none of our financial institutions - none of our insurance companies - are required to keep a 100% backup/reserve.

Slight clarification.  Some stable coins may be backed 1:1.  However, crypto-lenders, like traditional lenders, don't have 1:1 reserves. 

[Rosy]

This is why for my stablecoin stash I go for 30-70% PA using defi smart contracts rather than 7%.  It's all about the risk:reward ratio for me.]This is why for my stablecoin stash I go for 30-70% PA using defi smart contracts rather than 7%.  It's all about the risk:reward ratio for me.

Are you going to keep posting these rates without saying HOW this is possible?  I've seen algo DeFi stuff like the Terra Anchor protocol giving a "stable" 20% APY.  I've seen staking on KuCoin reach 30% for short term loans, but have since went down a ton.  Anything offer 70% feels like an outrageous liquidity pool rug pull waiting to happen.

I don't bother with crypto specifics on this forum because it's an extremely anti-crypto, conservative crowd here.  It wouldn't matter what I actually type because the replies are just 'tulips' and 'greater fool' 'backed by nothing' etc etc.  I'm not obligated to teach people to invest in crypto and nor do I care if they do or don't.  One thing I will say is what I like about these smart contracts is once they are set up the human element is very minimal.  If the code in the contract is legit it will remain on the blockchain forever, even if the website you use to operate it disappears or goes down you can still access the contract directly using blockchain tools and claim your yields or withdraw your money.  It's a much different element of risk to the centralised offerings and I seem to like it.

By the way, I didn't say these options were without risk.  My point was if I'm going to risk it, and just being in crypto and doing transfers and using wallets is a risk in itself, If I'm going to risk it I want the reward to be worth the risk.  7% to me isn't enough to reward to even justify bothering being in the space, it has to be higher.

@HeadedWest2029 - $3K earning $300 a month is pretty tempting and a risk/reward I could easily live with - well, maybe:). It is the first example in this video
https://www.youtube.com/watch?v=lqXFHm2q7JA - Drake on Digital - how and where he earns $5000 passive income every month.
Just stumbled across it this morning so I haven't looked into any of it yet.

Anyway, this is the website I wanted to share with you - defisafely.com. Great resource and risk evaluation tool - risk ratings and reviews. Bancor the one you referenced at 20% interest has a 25% risk rating out of 100.

[TheAnonOne]

Using Bancor with a Dapp is offering some serious returns for LP, they provide insurance (in a way) as well against impermanent loss after 30-100 days.

Some very cool stuff happening in the DEFI space either way.

[chicagomeg]

Really appreciated this thread when I was investigating these crypto bank accounts. Curious what your reactions to BlockFi's new withdrawal fees is. Basically $50/withdrawal for all but one withdrawal a month for a few currencies after Dec 1. I will continue to hold BTC & GUSD there but moved my other coins back to Coinbase where I can access them freely.

[MustacheAndaHalf]

This is why for my stablecoin stash I go for 30-70% PA using defi smart contracts rather than 7%.  It's all about the risk:reward ratio for me.

I consider margin very dangerous, and when I went on margin I planned to eat the loss quickly if I was wrong.  That's a caveat that you should do your own risk assessment before I present an extremely high risk idea/question.

What stops you borrowing USDT at 21.9% on margin from Binance, then using DeFi smart contracts to earn 30-70%?

[HeadedWest2029]

Why borrow at 21.9% when you can get IBKR margin (assuming you have a brokerage account) at 1.58% or 2.5% at Robinhood?

[maizefolk]

What stops you borrowing USDT at 21.9% on margin from Binance, then using DeFi smart contracts to earn 30-70%?

High collateral requirements would be my biggest guess.

[MustacheAndaHalf]

Why borrow at 21.9% when you can get IBKR margin (assuming you have a brokerage account) at 1.58% or 2.5% at Robinhood?

binance.us accepts USD, but it has 40x less volume than international Binance, which does not.  Since DeFi is "next on the hit list" for U.S. regulators, I wanted to avoid the gray area of using USD to invest (or other currencies where their respective countries may have regulations about crypto).
https://www.cnbc.com/2021/11/04/defi-the-wild-west-of-crypto-is-set-to-face-regulatory-crackdown.html

What stops you borrowing USDT at 21.9% on margin from Binance, then using DeFi smart contracts to earn 30-70%?

High collateral requirements would be my biggest guess.

Binance (international) doesn't have to follow U.S. regulations.  It appears users can decide how much risk they want to take.  Binance warns at a certain ratio of assets to loan, and sells off assets to pay off the loan if it gets worse.
https://www.binance.com/en/support/faq/360030493931

[mickeyj]

Following this thread closely to learn more.

I’m based in Singapore so while I have a Gemini account, the easiest way for me to fund crypto here is using Crypto.com because there’s a direct integration to fund SGD and buy USDC at 0 fees. Gemini is not that difficult but has higher fees just to buy and sell BTC/SGD and BTC/USD to have USD funds to buy other coins.

The additional risk for me is probably SGD-USD FX risk.

Crypto.com now offers a 3 month lock-in earn program for 10% p.a yield which I’m intending to move my bond allocation. It’ll all be in USDC stable coin so it’ll be less risky though yields can always change.

 I do think that Crypto.com has a chance to be one of the market leaders so I’m also planning to put some money into their utility coin (CRO) and then stake it with a validator who will then use it to validate transactions and share their profits (12+% p.a) in their Crypto.com Defi Wallet app to earn 12+% p.a. It’s more risky here because CRO price is more volatile and would fluctuate. But the benefits is that the returns can be claimed and restaked to compound returns.

Also trying out borrowing/lending through Aave.com Polygon (super low fees) to get more than 10% (the pros combine a few more other things to get crazy high returns) through leveraging with stable coins to also earn the rewards (Matic coin, which I also have high hopes on seeing this utility coin has helped me save loads of fees by avoiding transacting on the Ethereum blockchain).

Again, I’m rather conservative so I’m late in the game. Still learning from those who have started way earlier.

[goodmoneygoodlife]

I've had good results with blockfi.

When you say 8.6%, you're talking about DAI right?

The risks are:
1) Hacking
2) Regulating DAI/USDC/USDT which could make the coin itself drop value significantly. (i.e. not always 1-1 to USD)
3) BlockFi lowering interest. BlockFi used to do 6% BTC and I was quite happy about that, but the rates for ETH/BTC are abysmal nowadays.

Still, BlockFi staking is much safer than crapcoin<->crapcoin liquidity pool staking in pancake swap or something like that.

[Gatzbie]

This is why for my stablecoin stash I go for 30-70% PA using defi smart contracts rather than 7%.  It's all about the risk:reward ratio for me.]This is why for my stablecoin stash I go for 30-70% PA using defi smart contracts rather than 7%.  It's all about the risk:reward ratio for me.

Are you going to keep posting these rates without saying HOW this is possible?  I've seen algo DeFi stuff like the Terra Anchor protocol giving a "stable" 20% APY.  I've seen staking on KuCoin reach 30% for short term loans, but have since went down a ton.  Anything offer 70% feels like an outrageous liquidity pool rug pull waiting to happen.

I don't bother with crypto specifics on this forum because it's an extremely anti-crypto, conservative crowd here.  It wouldn't matter what I actually type because the replies are just 'tulips' and 'greater fool' 'backed by nothing' etc etc.  I'm not obligated to teach people to invest in crypto and nor do I care if they do or don't.  One thing I will say is what I like about these smart contracts is once they are set up the human element is very minimal.  If the code in the contract is legit it will remain on the blockchain forever, even if the website you use to operate it disappears or goes down you can still access the contract directly using blockchain tools and claim your yields or withdraw your money.  It's a much different element of risk to the centralised offerings and I seem to like it.

By the way, I didn't say these options were without risk.  My point was if I'm going to risk it, and just being in crypto and doing transfers and using wallets is a risk in itself, If I'm going to risk it I want the reward to be worth the risk.  7% to me isn't enough to reward to even justify bothering being in the space, it has to be higher.

@Juan Ponce de León None of this post makes sense. To obtain 30-70% in Defi you have to make a bunch of moves involving moving crypto tokens between various wallets, swapping between different crypto on various non-US based exchanges. In Cefi for current 7-12% stablecoin rate its withdrawing from bank account onto US-based platform - that's it. To get those rates you mention - you are taking more risk to get those rewards. That's not to say the Cefi exchange based out of USA is not safe either - this is crypto.

Those 30-70% returns "per annum" rewards rarely last long let alone a year. All it takes is one Twitter influencer with 150k followers to tweet the path to getting money into one of these liquidity pools & those rewards drop dramatically. Then you are wasting time to finding/researching for the the next 30-1000% liquidity pool for the same thing to happen or at worse....a rug pull where you lose it all.

I see people talking about "stable" 19% anchor returns. This return rate is being artificially subsidized from TerraLabs & is expected to drop to 12% in a couple of months because that money is running out. At that rate the fees involved with he 10 steps to get money onto it - makes it not worth.

When it comes to "getting rich quickly" or "fast money" - there is always a catch to it.

[EchoStache]

I had a bit over $300 in BTC and ETH that of course has dropped 40% in value recently.  Some was in CashApp and some in RobinHood.  I moved it over to Blockfi cuz why not get 5% or so on whatever is sitting there?  I'm getting ready to increase my cash reserves by another $10-$15k, wondering if I should put some into a stable coin for the 9%?

[HeadedWest2029]

Thought I'd share the SEC / BlockFi settlement findings which opens up the black box of how they generate yield quite a bit. 
Emphasis mine below.  I think the fine was justified.  I personally noticed their use of "overcollateralization" language kinda change over the years and was the hardest thing to pin down as an outsider.  SEC doing their job.  I still have money there, BTW.  You just have to realize there is significant risk there so size appropriately.

https://www.sec.gov/litigation/admin/2022/33-11029.pdf

BlockFi made a material misrepresentation to BIA investors concerning the level of
risk in its loan portfolio. Beginning at the time of the BIA launch on March 4, 2019 and
continuing to August 31, 2021, BlockFi made a statement in multiple website posts that its
institutional loans were “typically” over-collateralized, when in fact, most institutional loans were
not. When BlockFi began offering the BIA investment, it intended to require over-collateralization
on a majority of its loans to institutional investors, but it quickly became apparent that large
institutional investors were frequently not willing to post large amounts of collateral to secure their
loans. Approximately 24% of institutional crypto asset loans made in 2019 were overcollateralized; in 2020 approximately 16% were over-collateralized; and in 2021 (through June 30,
2021) approximately 17% were over-collateralized. As a result, BlockFi’s statement materially
overstated the degree to which it secured protection from defaults by institutional borrowers
through collateral. Through operational oversight, BlockFi’s personnel failed to take steps to
update the website statement to accurately reflect the fact that most institutional loans were not
over-collateralized.

Although BlockFi made other disclosures on its website regarding its risk
management practices, because of BlockFi’s misrepresentation and omission about the level of risk
in its loan portfolio, BIA investors did not have complete and accurate information with which to
evaluate the risk that, in the event of defaults by its institutional borrowers, BlockFi would be
unable to comply with its obligation to pay BIA investors the stated interest rates or return the
loaned crypto assets to investors upon demand.

[EchoStache]

Although action was warranted, was the $50,000,000 fine appropriate?  Maybe it is, but my knee jerk reaction is, are they trying to put the company out of business and ultimately penalize all the people who hold crypto with Blockfi?  Can they weather such a fine?

[HeadedWest2029]

I'm sure the SEC doesn't love crypto, but I don't think they are trying to bankrupt BlockFi either.  BlockFi was valued at $3 billion on the series D raise in 2021 so I doubt this destroys them.  They might have been OK if they didn't misrepresent the level of collateralization and didn't mix in other risks to the pool by purchasing GBTC shares with some of the lent money.  I was skeptical of the SEC investigation, but I think they raised some much needed transparency so investors can make more informed decisions.