The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: Icecreamarsenal on February 08, 2021, 11:54:06 AM
-
I'm not here to shill for BlockFi but I can't help but notice that they have an 8.6% interest rate.
I'm considering putting some funds in there to take advantage of this; the downsides seem to be that none of this money is FDIC-insured and that the rates are subject to change.
Am I missing something here?
-
I started investing with BlockFi this year. I'd say the biggest concerns I see come up is
1) the practice of bitcoin rehypothetication
https://www.investopedia.com/terms/r/rehypothecation.asp (https://www.investopedia.com/terms/r/rehypothecation.asp)
2) The no FDIC or SIPC insurance for crypto exchanges
3) Security - exchanges get hacked all the time. Partially mitigated by turning on 2FA, whitelisting your account to limit your stash getting withdrawn to a random wallet where there's no clawback possible unlike traditional banking, and the fact that Gemini and other reputable exchanges keep most of the coins in cold storage.
4) And in general, the balance sheet strength of the company to withstand crazy price movements or other black swan event.
On the plus side, they spread out their crypto to multiple custodians, including well-respected Gemini.
With Gemini, their stablecoin GUSD is tied to USD and audited by a New York company to ensure there's no funny business. They actually have real dollars to match GUSD 1-1.
In terms of the capital stack, customers get paid 1st in the event of a catastrophic liquidation.
They are headquartered in the U.S. (I point that out because some of the other competitors are very coy about their locations & how you can contact them).
I'm not an expert on loan to asset type ratios, but it sounds like the people leading their lending program make sure their borrowers are overcollatorized and as of yet they've never had a borrower default.
To me, it seems the least shady of the numerous websites doing crypto interest accounts (Nexo & Celsius offer even higher interest rates and are often mentioned. But there are ones that seem super duper shady to me like KuCoins in Hong Kong with outrageous rates and weird fees).
In short, I'm doing it. I still want to know more about the company and listen to pretty much every podcast the CEO goes on. I suspect the rates will go down significantly when the market matures and there is less arbitrage opportunities (like the spread between exchanges and the spread between crypto futures and market price), but for the time being I've put some of the "high yield" savings account into BlockFi
EDIT: shameless plug, if anyone wants to use my referral link https://blockfi.com/?ref=2759b0eb (https://blockfi.com/?ref=2759b0eb)
-
Very thorough, thank you so much.
I may use this as a bond equivalent, and at least as a high yield savings account.
-
6-8% yield on your crypto if you take the risk to let BlockFI hold it. You can also borrow up to 50% of the value of your crypto. Looks like a decent risk vs reward.
-
(MOD EDIT: Merged threads, dropped link to other thread)
It seemed strange to me that BlockFI seems to be paying much higher interest rates for "stablecoins" that are supposed to maintain a fixed value relative to the dollar and lower interest rates on thinks like bitcoin where there is presumably exchange rate risk for the lender.
-
I'm not sure how they make money on stable value coins. They've stated publicly on multiple occasions that they make their money by loaning out coins to firms performing arbitrage, but again I don't know how that would work with a stable value coin.
https://podcasts.apple.com/ca/podcast/talk-your-book-investing-in-bitcoin/id1310192007?i=1000500465482
https://theirrelevantinvestor.com/2021/01/29/animal-spirits-crypto-as-an-emerging-store-of-value/
-
Another downside: 5 days for a transfer to clear, it seems. Strangely illiquid or industry standard? I dunno.
-
Yeah, that's definitely annoying, though they're slated to have instant ACH ready in Q1 according to the CEO.
https://mobile.twitter.com/BlockFiZac/status/1356593986455146496 (https://mobile.twitter.com/BlockFiZac/status/1356593986455146496)
-
I'm interested in the, er, interest rate available for all sorts of things like this - but the thing is, AFAIK, you're basically just investing in p2p lending behind the scenes.
I can't see that this is any safer than normal p2p, and you have massive price risk with the crypto itself on top.
Dunno. If something sounds too good to be true, it probably is, right? Of course there is money to be made, but I honestly believe it is 'greater fool' money. If you want to speculate a small amount on it, cool.
-
you're basically just investing in p2p lending behind the scenes
As someone who invested with Prosper, this is different. P2P's big shortfall was it wasn't collateralized so if the person borrowing had a financial hardship there was no floor to protect against default. This is more akin to borrowing on margin, where the borrowers have assets staked to their loan. If there's a price drop and your loan to value drops to 70%, you get a margin call. That's not to say there couldn't be some WILD swings, but on the plus side BlockFi survived the price drop in 2020 without any defaults.
https://blockfi.com/crypto-collateral-value (https://blockfi.com/crypto-collateral-value)
you have massive price risk with the crypto itself
This depends on how you play it. If you are doing an interest account holding bitcoin, then yes. You have risk in loss of principal. But you can park it in stablecoins like GUSD which don't fluctuate any more than the dollar. With the obvious disclaimer there is no government backed insurance for stablecoins like USD, nor will there ever. I can't see the government competing against their own currency by insuring crypto.
-
FYI - Gemini entering the game now
https://www.gemini.com/earn#calculator (https://www.gemini.com/earn#calculator)
Note: Loans from Gemini to their partners are uncollateralized (right now, they only lend to Genesis). However, from my understanding Genesis loans to their partners are collateralized (to what extent, I'm not sure) and audited by Gemini periodically.
https://www.gemini.com/legal/gemini-earn-program-terms-and-authorization-agreement#section-1-program-risks (https://www.gemini.com/legal/gemini-earn-program-terms-and-authorization-agreement#section-1-program-risks)
-
Pretty decent summary that gets at the heart of my original reply
https://blockfi.com/how-blockfi-handles-risk-and-security
Also, today I learned how many users there are on each platform (attached). Didn't realize Nexo was so big.
FYI - Nexo headquarters is in Europe, Celsius is UK, and BlockFi is in the U.S.
-
Transferring money in BlockFi is a PiTA unless you wire transfer. 5000 a day limit with ACH.
I am planning to move my emergency fund / cash into it (100k) held in the Gemini dollar, and have the interest buy me bitcoin.
Have a listen to this podcast, they lay out the arbitrage opportunities that i think are likely taking place that allows them to pay this high of an interest rate (much more but they are keeping half)
https://podcasts.apple.com/us/podcast/we-study-billionaires-the-investors-podcast-network/id928933489?i=1000508418830
-
2) The no FDIC or SIPC insurance for crypto exchanges
A Crypto bank is an oxymoron to me.
In the US, a bank is by definition FDIC insured. What's the big deal about FDIC, you may ask? Well, it's kinda like vaccines, we've had it so long we cannot remember what life was like before the FDIC.
Before the FDIC, a bank was just a business like any other, except it was in the business of loaning money. So, you could give them your money, but nothing would prevent the banker from taking your money and skipping town, other than his honor, integrity and the local sheriff. Or, if the bank were robbed, well, you were robbed too unless the bank covered the loss. And maybe they did cover the loss and maybe they didn't--it was beyond your control and generally up to the honor, integrity and business acumen of the bankers who weren't good at loss prevention as they'd just been robbed. Now the FDIC insures all bank deposits up to a certain amount (currently $250k) and thus makes banks safe for all depositors. The crypto ecosphere doesn't have anything remotely like the FDIC, to my knowledge. I'd love to hear otherwise if someone knows more than I do.
In the current interest rate environment, what is this company (masquerading as a bank) doing to offer 8.6% interest? Who are they lending to in order to generate such a return? Or, what are trading are they engaged in to offer such a return? What if BlockFI's investments fail? Will they still refund your money or simply say 'Sorry'?
To me, it's extremely risky and bound to end in tears.
If one is looking for 8% yield, then I believe Altria (ticker symbol MO) is a much safer choice. YMMV.
-
I'm not going to do the following, but what's to stop someone from taking out their HELOC at 3.25% and putting the balance in blockfi at 8.6%?
Other than the financial armageddon and the lack of FDIC insurance as mentioned above.
-
I'm not going to do the following, but what's to stop someone from taking out their HELOC at 3.25% and putting the balance in blockfi at 8.6%?
Other than the financial armageddon and the lack of FDIC insurance as mentioned above.
Risk, that's all. Arguably better than borrowing to buy a truck. Same level as P2P - ok for a small amount, but be prepared to lose your investment. Actually probably worse than P2P, at least with that there are agreements etc in place.
To me, when you go and read all the blurb on the sites promoting this, it's all extremely positive - telling you what risks there aren't. But they aren't telling you what risks there are.
It's greater fool with no actual utility (at least if you buy an overpriced condo in Toronto, you own a condo in Toronto...).
-
Yes. There is risk.
However, BlockFi seems to be backed by and partnered with some legitimate companies.
They provide services for fidelity, are backed by Winklevoss and coinbase —- places that have so far proved out to be legitimate and trying to be regulated and not the Wild West.
That being said —- I’d be retired if i put all my investments in here at 8%. I won’t be, but willing to accept risk of parking my cash here. To each their own, and good luck!
-
That being said —- I’d be retired if i put all my investments in here at 8%. I won’t be, but willing to accept risk of parking my cash here. To each their own, and good luck!
This is a side issue about a hypothetical, but to keep in mind that when comparing interest rates and the 4% rule (or similar percent withdrawal rules), the interest rates are before inflation while your own spending (and the outputs of most withdrawal rate studies/simulations) are after inflation.
So over the super long term you'd probably need to reinvest 1/4-1/3 of your BlockFI interest income in order to sustain constant post-inflation spending in retirement. Of course, this isn't unique to BlockFI, the same point applies when people talk about the interest rates of bonds or CDs and what'd take to retire.
-
The crypto ecosphere doesn't have anything remotely like the FDIC, to my knowledge. I'd love to hear otherwise if someone knows more than I do.
No, there isn't. The United States government isn't going to issue insurance for a competing currency. If that's a deal breaker, this isn't for you.
In the current interest rate environment, what is this company (masquerading as a bank) doing to offer 8.6% interest? Who are they lending to in order to generate such a return? Or, what are trading are they engaged in to offer such a return?
If you are genuinely interested, this is explained in this video.
https://www.youtube.com/watch?v=SYMF2yjn8TQ (https://www.youtube.com/watch?v=SYMF2yjn8TQ)
What if BlockFI's investments fail? Will they still refund your money or simply say 'Sorry'?
BlockFi client funds are structured to be at the top of the capital stack, senior to BlockFi equity and BlockFi employee capital. This means BlockFi’s business and client incentives are aligned and BlockFi would take a loss before any client would.
Keep in mind the retail borrowers get margin called. This is no different then borrowing margin in the stock market. If the LTV reaches 70% you get a warning and you must fix it within a few days, if it gets to 80% they start liquidating whether you like it or not. This happened in past crashes with BlockFi and so far the margin call system hasn't failed. The institutional borrowers are whales. We're talking Fidelity, Susquehanna, and other multi-billion dollar enterprises with decades of market making experience...in other words, due diligence. You can't have a few million bucks and become one of their institutional borrowers. You have to have huge assets and tons of experience to get into that program.
I'm not going to do the following, but what's to stop someone from taking out their HELOC at 3.25% and putting the balance in blockfi at 8.6%?
Other than the financial armageddon and the lack of FDIC insurance as mentioned above.
I'm taking out 2.5% margin from a brokerage and getting 8.6% with BlockFi. So I don't think it's crazy, but I'll bracket it by saying I have bonds & cash I could uses to pay off this margin quickly if things go tits up with BlockFi or rates increase at the brokerage or decrease at BlockFi. And I only put in an amount at BlockFi that wouldn't be ruinous if things go sideways.
Risk, that's all. Arguably better than borrowing to buy a truck. Same level as P2P - ok for a small amount, but be prepared to lose your investment. Actually probably worse than P2P, at least with that there are agreements etc in place.
Answered above, but no, it's not worse than P2P in my opinion. Prosper / Lending Club were uncollateralized loans. I saw so many loans disappear after 120 days of no payment from the borrower with no recourse. BlockFi overcollateralizes loans from retail borrowers. Their CRO comes from the banking world and has never had a default in banking or with BlockFi with institutional borrowers who have a treasure trove of assets.
-
Does Block FI have a prospectus or anything equivalent to a prospectus about their account? I see a bunch of articles on their web site, but nothing that looks like a self-contained complete explanation. On this page I see a short statement: https://blockfi.com/how-blockfi-handles-risk-and-security
In order to pay our clients crypto interest on a monthly basis and to meet withdrawal requests on a timely basis, we engage in a number of activities, including (1) keeping a material amount of digital assets available for withdrawal with third parties such as Gemini and Fidelity; (2) purchasing, as principal, SEC-regulated equities and predominately CFTC-regulated futures and (3) applying risk management to the lending activities in the institutional market.
So they hold reserves, invest in equities, and trade CFTC-regulated futures. That sounds like a mutual fund to me, which has risk if their trades don’t work out.
-
So far so good. I have about 20% of my paycheck going into blockFI now. Loving the interest. I may go to 80% as my other accounts are already at FI targets. If I can get around 300k in there, that would pay all my bills in just interest. That will take at least a year.
-
Check out the withdrawal fees before putting anything into BlockFI - they say they allow one crypto and one stablecoin withdrawal per month. After that and the fees vary by asset— as little as 25 cents for stablecoin, as high as 0.0025 btc for bitcoin.
https://help.blockfi.com/hc/en-us/articles/360049343931-Are-there-any-withdrawal-fees-
-
I'm not sure why I would need to withdraw more then once a month. $130 (current fee) is reasonable if I had to do 2 for some reason.
-
BlockFi client funds are structured to be at the top of the capital stack, senior to BlockFi equity and BlockFi employee capital. This means BlockFi’s business and client incentives are aligned and BlockFi would take a loss before any client would.
...
I'm taking out 2.5% margin from a brokerage
I've been listening to a bunch of interview with the CEO recently, and this is one of the main points that is convincing me. I haven't invested yet, but have been thinking about it. The fact that they would wipe out their entire company equity before any client losses says a lot. That and they made it through the March 2020 50% fall without issues.
What's your LTV on that margin loan? How much of a fall in the market would trigger a margin call? Which broker? I know IB has good rates.
-
I'm doing it at Robinhood. Not a recommendation per se. if I was starting fresh I would do IB as well for the better rates. I was just early on the Robinhood adoption and they dropped their margin rates in December and it just seemed easier to capitalize there versus wait on a transfer when rates are liable to change across brokers over time. Robinhood allows different margin borrow based on if you are borrowing to buy more stocks inside of Robinhood versus transferring out as cash (or least it appears that way in my account). I can take out roughly 65% of the account balance if I really wanted to as cash margin. My required maintenance balance is roughly 25% of my equity holdings, but I'm 100% total stock market index funds and not in risky ETF's or meme stocks so I think that factors in the equation.
-
BlockFi client funds are structured to be at the top of the capital stack, senior to BlockFi equity and BlockFi employee capital. This means BlockFi’s business and client incentives are aligned and BlockFi would take a loss before any client would.
...
I'm taking out 2.5% margin from a brokerage
The fact that they would wipe out their entire company equity before any client losses says a lot.
The thing it says to me is that they have nothing to lose. (Where everything = nothing, they can write pretty words for free). I might be a bit cynical. Lots of banks went bust in 2008/09 but that didn't make CDO's a good/better investment.
-
I'll push back a little on this, but agree at the end of the day this is a private company and I don't have access to their balance sheet or corporate governance documents.
The CEO was interviewed yesterday here and it largely centered around customer questions about risk management https://www.theinvestorspodcast.com/bitcoin-fundamentals/btc013-bitcoin-lending-borrowing-w-blockfis-zac-prince-mark-yusko/ (https://www.theinvestorspodcast.com/bitcoin-fundamentals/btc013-bitcoin-lending-borrowing-w-blockfis-zac-prince-mark-yusko/)
Highly recommend listening to the entire thing if you are interested in dipping your toe into BlockFi.
The size of assets on the platform is over $10 billion. So I take that as $10 billion of assets at risk. It's growing every week by a quarter billion...so massive growth.
There is insurance in place at custodians like Gemini, but BlockFi itself looked into insurance for it's lending activities but apparently it's crazy expensive. He says in the interview it would eliminate all the yield, but he believes in the future insurance may be more viable in the future.
In terms of capital stack (which is discussed around the 49:20 mark), he said there is north of half a billion of equity that is junior to people who are putting their money into BlockFi. Obviously $500 million is less than $10 billion.
Also, they just had a series D offering where the company was valued at $2.85 billion and they plan on going public soon (I've heard before the end of the year), so there's definitely a huge carrot for them not screwing this up. I honestly look forward to this because it would provide further transparency in terms of balance sheet strength and SEC regulations.
-
Great info, Headedwest. Let's play with those numbers some.
So.... $500million in equity on $10billion. .... that's ..... 5%, right? So, assuming this is what I believe a bank would refer to as "Tier 1 capital" BlockFI can sustain losses of 5% before being forced to pass them on or go out of business. If they're growing deposits at the rate of $1 billion per month, then this "Tier 1 Capital" percentage will shrink very very quickly. Keep in mind, everyone wants interest beginning from the date of their deposit, which might or might not be the date that BlockFI can lend it out again.
I think the Basel II bank requirements state that Tier 1 capital for banks should be greater than 6%, and Block FI is close, at 5%.
Basel II also goes on to state that Tier 1 + Tier 2 capital requirements should be above 8%. So, Block FI is about $300 million short of 8%, if assists remain at $10b and do not grow. Again, this is assuming that the $500m is equivalent to Tier 1 capital.
https://en.wikipedia.org/wiki/Capital_requirement (https://en.wikipedia.org/wiki/Capital_requirement)
Also, if insurance would reduce the dividend to zero, then that tells me that the insurance would be around 8% annually. That's some pretty expensive insurance!!! My next question is 'why is it so expensive?'. I don't have the slightest idea why.
To me, the biggest risk isn't BlockFI itself--it's who they give their money to. How many legitimate (and honest!) money managers gave their money to Bernie Madoff in good faith? They still lost money, even though they did everything right. So, BlockFI could be very well run, even exceptionally well run, but who are they loaning to so that they can provide 8% return to investors? This means that BlockFI must be charging 10% (or more!) interest.
Who would pay 10% interest in a zero-interest rate environment? Only a borrower who couldn't get money anywhere else at a lower rate. Which to me is an indicator BlockFI is engaged in low quality debt lending.
Added to all of the above, there's no deposit insurance, which means that BlockFI isn't a bank, just a company masquerading as a bank.
-
Here's the answers I spotted:
https://coincentral.com/blockfi-review/
How is offering a 5.2% on BTC interest rate sustainable?
“The interest we are able to pay is based on the yield that we are able to generate from lending, which directly correlates to the market demand in the space (I.e. what rate institutions are willing to pay to borrow specific crypto assets, as it varies from asset to asset). We are bound by NDAs to discuss specifics (institutions, specific rates, etc).”
How about the 8.6% interest rate on Gemini Dollars? Can you talk about why Gemini?
“We are able to use stablecoin deposits to fund our consumer loans (average APR is ~10-13%) so we can afford to pay higher interest to GUSD / Stablecoin depositors.”
They also mention an SOC2 compliance audit by Deloitte, which was also reported on various websites related to crypto. Not sure how to corroborate that, since Deloitte's website says nothing either way.
Things in it's favor: based in U.S., multiple rounds of funding, supposedly audited by Deloitte (can't verify that). Compared to most crypto exchanges, that's pretty good.
I suspect all the high interest rates are teaser rates to draw customers in. I wonder how they'll adjust the rates downwards without losing lots of customers?
-
who are they loaning to so that they can provide 8% return to investors? This means that BlockFI must be charging 10% (or more!) interest.]who are they loaning to so that they can provide 8% return to investors? This means that BlockFI must be charging 10% (or more!) interest.
This is all answered in the pod and also upthread. Basically, hedge funds, market makers with billions and billions and decades of experience (Fidelity, Susquehanna, and others I'm sure that have NDA's). There's tons of arbitrage opportunities in crypto right now. Price differences between exchanges, price difference between futures and spot price, hedge funds doing hedge fund things. They've said in different interviews that their intuitional investors make somewhere between 10%-20% basically playing the arbitrage game and getting free money. Whether that lasts as the market matures...your guess is as good as mine. I think the insurance thing is mostly because no insurance company knows what the hell to do with crypto. Traditional banking has a pretty well known risk profile and they probably just don't want to go near crypto. If you are an insurance company and you insure it and it blows up...that's some serious career risk.
Who would pay 10% interest in a zero-interest rate environment?
Also answered in the pod, but prime brokers who provide capital to hedge funds aren't in the crypto game. In lieu of that BlockFi stepped in and can charge 10% and they pay it because 20% is > 10%. Retail borrowers are a different story, but the common thread seems to be people sitting on massive capital gains as early adopters that don't want to trigger taxes and are super bullish on bitcoin and don't really want to sell, but want to tap into the gains for life stuff. I feel that's less defensible, but those folks are subject to tighter margin calls.
Thanks for the info on Tier 1 capital. I had no idea if their ratio was bonkers risky or normal
-
who are they loaning to so that they can provide 8% return to investors? This means that BlockFI must be charging 10% (or more!) interest.]who are they loaning to so that they can provide 8% return to investors? This means that BlockFI must be charging 10% (or more!) interest.
This is all answered in the pod and also upthread. Basically, hedge funds, market makers with billions and billions and decades of experience (Fidelity, Susquehanna, and others I'm sure that have NDA's). There's tons of arbitrage opportunities in crypto right now. Price differences between exchanges, price difference between futures and spot price, hedge funds doing hedge fund things. They've said in different interviews that their intuitional investors make somewhere between 10%-20% basically playing the arbitrage game and getting free money. Whether that lasts as the market matures...your guess is as good as mine. I think the insurance thing is mostly because no insurance company knows what the hell to do with crypto. Traditional banking has a pretty well known risk profile and they probably just don't want to go near crypto. If you are an insurance company and you insure it and it blows up...that's some serious career risk.
Who would pay 10% interest in a zero-interest rate environment?
Also answered in the pod, but prime brokers who provide capital to hedge funds aren't in the crypto game. In lieu of that BlockFi stepped in and can charge 10% and they pay it because 20% is > 10%. Retail borrowers are a different story, but the common thread seems to be people sitting on massive capital gains as early adopters that don't want to trigger taxes and are super bullish on bitcoin and don't really want to sell, but want to tap into the gains for life stuff. I feel that's less defensible, but those folks are subject to tighter margin calls.
Thanks for the info on Tier 1 capital. I had no idea if their ratio was bonkers risky or normal
Prime brokers can get all the capital they want from the Fed at the Fed. funds rate of..... 0.25%. There are about 20 prime brokers in the USA, all household names to those who follow finance; Goldman Sachs, JPMorgan Chase, Bank of America, Citi, etc. I saw a handy list of them a couple of weeks ago, but can't find it now. Here's an example;
https://www.thebalance.com/what-is-prime-brokerage-4165497
So, I highly doubt that BlockFI is loaning out to prime brokers. I cannot imagine a scenario where Fidelity is paying 10% for money. Or market makers for that matter. Market makers generally have access to lots of capital at much lower rates, similar to prime brokers. Some companies in the crypto space might call themselves market makers, but in reality they're just speculators going very long or short.
Hedge funds would be willing to pay 10% or more. But, they can blow up from time to time and thus tend to be risky. Melvin Capital lost a cool $5blillion (over 50%) in January on GME, for example. Their short position on GME was a money printing machine since 2014, until it wasn't.
Retail investors using BlockFI as a margin loan might be willing to pay 10% or more. But what happens if the loans get called due to the volatility of crypto? BlockFI had better have good controls in place, otherwise they'll lose everything as well. As an depositor, one has no way of knowing how good their controls are. Perhaps try to sign up for a loan with them and see how strict their terms are?
-
Prime brokers can get all the capital they want from the Fed at the Fed.
Not talking about Prime broker / BlockFi relationship. I'm talking prime brokers lending to hedge funds who are BlockFi's institutional customers. So a hedge fund would normally have a relationship with a prime broker to borrow money, but when it comes to crypto the prime brokers won't lend to the hedge fund. Enter BlockFi
Retail investors using BlockFI as a margin loan might be willing to pay 10% or more. But what happens if the loans get called due to the volatility of crypto?
You gotta listen to these podcasts. You have good questions and seem interested, and honestly the CEO patiently works through these questions better than I could. The margin call system is automated and operating 24/7 (as the crypto markets are) and worked in 2020 when there were 50% drops. They also keep crypto on the sideline to facilitate liquidity so they don't have a situation where they have to margin call a bunch of people without enough buyers on the other side. This is low on my list of concerns because their risk management team came from FinTech backgrounds, including their CRO who created margin call systems for nontraditional assets before coming to BlockFi. Again, his word, but he's NEVER had a loss. At BlockFi or otherwise.
CRO interview - https://www.youtube.com/watch?v=SYMF2yjn8TQ (https://www.youtube.com/watch?v=SYMF2yjn8TQ)
In favor of you signing up for an account to borrow and see the LTV you get :)
-
I'm starting to put some more into blockfi and have reached low 5 figures. Hopefully it doesn't go the way of BitMEX.
https://www.vanityfair.com/news/2021/02/the-rise-and-fall-of-bitcoin-billionaire-arthur-hayes?utm_source=pocket-newtab
-
Indeed. That's a wild story
One hundred times leverage available to retail traders and incorporated in Seychelles.
Yikes
-
I like the idea of it, but it sounds like it would be a bit of a hassle to use. One of my core values is low hassle. Seeing that I would either have to buy lite coin for the lower fees and send to them, then convert to the stable coin incurring multiple taxable events, or do a wire transfer may be nudge to it being a deal breaker for me, considering there is also some unknown risks associated with it.
-
Seeing that I would either have to buy lite coin for the lower fees and send to them, then convert to the stable coin incurring multiple taxable events, or do a wire transfer may be nudge to it being a deal breaker for me
I don't understand this. Are you saying you currently have Lite coin and would want to use it at BlockFi?
I did none of this. I just ACH'd USD in from my savings account and it purchased GUSD by default. No taxable events other than interest at the end of the year.
-
Interesting. I read in the past that arch wasn’t an option and you could only transfer other crypto to it or use wire transfers for a fee. Maybe it’s worth checking out then as another diversifier
-
ACH is an option, but only $5000 in a 24 hour period. ACH they say takes 3-5 days to clear, but my experience has been it takes a bit longer then that at Blockfi.
I deposited .5 BTC and it became immediately available in a few hours (Go Crypto).
I've deposited $20k in cash which became GUSD. I have $25k more of USD that is in a "pending" status and will become GUSD when cleared.
MY goal is to get ~$500 in monthly interest that is paid in bitcoin.
You can see daily how much interest you have accrued which is pretty neat and dwarfs what this cash earned me in a savings account.
-
I threw $100 into another company called Donut on a whim from an Instagram ad a few weeks ago. Mostly just to give myself some time to noodle on it & decide how much more I'm willing to put in to this concept. I'm not terribly impressed with the level of information they have available though, and they have this uber gimmicky UI that shows your interest out to 9 decimal places which drives me nuts. Going to do some digging on BlockFi, thanks for the info that's been posted so far.
-
I think it is funny how many people bring up bitcoin does not generate dividends...
-
I replaced my bonds in my portfolio to stablecoins on Celsius Network (I have a little bit in blockfi, but don't add more as Celsius offers higher interest), and I'm happy for the switch. I plan on firing in a year and my conservative position of stablecoin "bucket" will be full in a couple days. So I should stop contributing to my stablecoin position, and start just contributing more to VTSAX in my taxable broker account (all my retirement accounts are maxing out)?
Things I'm looking at is, interest is taxed as normal income, then again when I fire my taxable income will be very low after factoring in MFJ standard deduction. On the other hand long term realized capital gains tax will equate to no tax, and VTSAX has a higher expected return.
-
You folks are braver than I am. I'm fascinated to see how interest bearing crypto accounts play out. At the moment I cannot wrap my head around why stablecoins linked to the USD are generating so much higher interest rates than USD itself and that makes me nervous.* Remember how excited people got about the higher returns on LendingClub for a few years?
In any case, thank you for the people willing to put their actual money on the line to test these products out. Hope you continue to post with your experiences.
*I can understand why loaning out bitcoin would pay higher interest than USD giving the independent inflation/deflation risk.
-
I can understand why loaning out bitcoin would pay higher interest than USD giving the independent inflation/deflation risk
That has nothing to do with it. It's simply demand based on the amount of return the institutional customers are currently able to get via arbitrage opportunities (whether it's bitcoin derived or stablecoin derived loans), often in a market neutral way. One such way, was historically the premium to NAV on GBTC now trading at a discount.
https://ycharts.com/companies/GBTC/discount_or_premium_to_nav (https://ycharts.com/companies/GBTC/discount_or_premium_to_nav)
If these arbitrage opportunities dry up, and I suspect they will over time as the market matures, the interest rates will necessarily go down. But for now, it's essentially "free money". Not that this accounts for all the lending activity. The GBTC trust arb accounts for something like 5-20% of the lending activity.
Also, LendingClub / Prosper were uncollateralized loans. Retail borrowing at BlockFi runs on a margin call system. Institutional borrowing at BlockFi is done by mega hedge funds, not cousin Ron taking out a loan to consolidate his 20 credit cards.
Sure, there's some opaqueness there because BlockFi and hedge funds aren't going to lay out all their strategies for others to copy, but I'll take this bet all day, every day, over Lending Club. Time will tell
-
HeadedWest2029, so if I understand you correctly, your model is that the higher interest rates folks are willing to pay to borrow in stablecoins pegged to the dollar vs the dollar itself have to do with the relative friction of borrowing from places like BlockFI vs borrowing in US dollars and converting those borrowed dollars into stablecoins?
-
My understanding is hedge funds typically get loans from prime brokers. Prime brokers by and large, will not lend to hedge funds or market-makers for cypto-based trading activity which leads to a cash supply shortage for these arbitrage trades. I'm guessing if prime brokers were willing (or able? not even sure if they're legally allowed to) to provide liquidity in this market, they would go there instead and borrow in USD. At least, this is what I've gleaned from listening to various podcasts.
-
Perhaps we're listening to some of the same podcasts? At least that sounds a lot like what Jeremy Allaire was talking about on Real Vision a couple of weeks ago.
So to repeat back to you what understand you to be saying this time, the issue isn't about friction in transferring US dollars to stablecoins but that the people who normally lend to hedgefunds aren't willing to loan to hedgefunds for cypto. So the interest premium at places like BlockFI actually has nothing to do with borrowing in stablecoins, but that the loans clients can take out are allowed to be used to purchase other -- nonstable coin -- cryptocurrencies?
-
I believe that assessment is correct. I guess there's minimally less friction because stablecoin is already stored at crypto exchanges where these hedge funds have accounts, but the interest rate isn't inherently a stablecoin story itself. They (hedge funds / market makers) also get arbitrage profits from variations in crypto pricing between global crypto exchanges. So the hedge funds could have accounts at multiple exchanges where bitcoin is priced at $55,600, $55,620, $55,700, etc. And they just move money around. Don't believe I've ever listened to Allaire. Should I?
Some podcasts I've listened to with the CEO, Zac Prince
https://onthebrink-podcast.com/zac-prince-blockfi-2/ (https://onthebrink-podcast.com/zac-prince-blockfi-2/)
https://www.theinvestorspodcast.com/bitcoin-fundamentals/btc013-bitcoin-lending-borrowing-w-blockfis-zac-prince-mark-yusko/ (https://www.theinvestorspodcast.com/bitcoin-fundamentals/btc013-bitcoin-lending-borrowing-w-blockfis-zac-prince-mark-yusko/)
https://awealthofcommonsense.com/2020/11/talk-your-book-investing-in-bitcoin/ (https://awealthofcommonsense.com/2020/11/talk-your-book-investing-in-bitcoin/)
https://awealthofcommonsense.com/2021/01/talk-your-book-crypto-as-an-emerging-store-of-value/ (https://awealthofcommonsense.com/2021/01/talk-your-book-crypto-as-an-emerging-store-of-value/)
With the CRO
https://www.youtube.com/watch?v=8Mtyyf4RnUA (https://www.youtube.com/watch?v=8Mtyyf4RnUA)
https://www.youtube.com/watch?v=SYMF2yjn8TQ (https://www.youtube.com/watch?v=SYMF2yjn8TQ)
-
Given what you and I have already talked about, my guess is that you would find at least the particular podcast I listened to with Allaire would be a lot of review rather than new information.
Anyway, this mental model of why people are willing to pay much higher rates to borrow money which can be invested in cyptocurrencies than the prevailing interest rates for USD borrowing (which those same people aren't allowed to borrow at if they're going to use the loan for cyptocurrency transactions) starts to make sense for me. As you say, one potential outcome is that the places hedge funds would normally borrow from realize they are being unnecessarily conservative and start lending for these purposes and the stablecoin interest rates drop to be quite similar to the interest rates of the currencies they are pegged to. Another would be that it turns out the normal lenders were right to avoid lending money to finance crypto transactions (something blows up to the extent collateral and/or equity cushions cannot absorb and the lenders take a loss).
-
My understanding is hedge funds typically get loans from prime brokers. Prime brokers by and large, will not lend to hedge funds or market-makers for cypto-based trading activity which leads to a cash supply shortage for these arbitrage trades. I'm guessing if prime brokers were willing (or able? not even sure if they're legally allowed to) to provide liquidity in this market, they would go there instead and borrow in USD. At least, this is what I've gleaned from listening to various podcasts.
Thank you for this succinct explanation, really gets rid of the technobabble and clears it up.
-
I can understand why loaning out bitcoin would pay higher interest than USD giving the independent inflation/deflation risk
That has nothing to do with it. It's simply demand based on the amount of return the institutional customers are currently able to get via arbitrage opportunities (whether it's bitcoin derived or stablecoin derived loans), often in a market neutral way.
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.
-
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?
-
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.
-
how are these crypto banks working out for you guys?
-
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 (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.
-
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.
-
So far so good. I withdrew my entire balance of $50k to test, was transferred with no issues. I'm back in.
-
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 (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 (https://www.gemini.com/earn) - 7.4% APY
Nexo (Switzerland) - https://nexo.io/earn-crypto (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 (https://celsius.network/earn-rewards-on-your-crypto) - 8.88% APY
Voyager (US) - https://rewards.investvoyager.com/interest/ (https://rewards.investvoyager.com/interest/) - 9% APY
Other
Peer-to-peer staking @ KuCoin (Hong Kong), interest varies wildly - https://www.kucoin.com/margin/lend (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/ (https://aave.com/)
Compound- https://compound.finance/markets (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.
-
Plenty of ways to get 30-50% PA on stablecoins in defi
-
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
-
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...
-
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.
-
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.
-
Pretty decent writeup here on comparing various crypto interest companies https://prohashing.com/guides/earning-interest-on-cryptocurrencies (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.
-
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?
-
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.
-
Anything promising you super high interest rates has to be a Ponzi scheme. If it is too good to be true, it is.
-
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
-
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.
-
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?
-
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.
-
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.
-
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.
-
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/ (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.
-
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.
-
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 (https://sec.report/CIK/0001336973)
-
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?
-
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 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.
-
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.
-
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.
-
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
-
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.
-
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.
-
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.
-
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).
-
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.
-
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.
-
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.
-
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.
-
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%?
-
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?
-
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.
-
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
-
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.
-
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.
-
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.
-
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%?
-
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 (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.
-
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?
-
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.
-
Can they weather such a fine?
If you can't pay the fine, don't do the crime.
-
Here's a pretty insightful look at their loan balance sheet in regards to collateral. https://help.blockfi.com/hc/en-us/articles/4416057566228-What-are-the-risks-of-holding-my-crypto-at-BlockFi- (https://help.blockfi.com/hc/en-us/articles/4416057566228-What-are-the-risks-of-holding-my-crypto-at-BlockFi-)
So they aren't overcollateralized, but they aren't crazy under-collateralized either. $1.8 billion of loans not backed by collateral (or 20% of the BIA balance). This makes me feel a little better
-
Here's a pretty insightful look at their loan balance sheet in regards to collateral. https://help.blockfi.com/hc/en-us/articles/4416057566228-What-are-the-risks-of-holding-my-crypto-at-BlockFi- (https://help.blockfi.com/hc/en-us/articles/4416057566228-What-are-the-risks-of-holding-my-crypto-at-BlockFi-)
So they aren't overcollateralized, but they aren't crazy under-collateralized either. $1.8 billion of loans not backed by collateral (or 20% of the BIA balance). This makes me feel a little better
In addition
"It is true that we do offer some institutional loans that have less or no collateral. For the past year we have taken to disclosing our net exposure for the public to see. The key is that we only offer under or uncollateralized loans to institutional clients after subjecting them to rigorous underwriting. Accordingly, they are counterparties of the highest caliber. To date, we have not seen any defaults from our unsecured institutional business."
"The BIA's are (and the BlockFi Yields will be) BlockFi corporate debt and will be treated as such in bankruptcy."
"The BIAs are unsecured credit of BlockFi. BlockFi does now and intends to, going forward, take on secured credit which may rank above customer assets in a bankruptcy."
Taken from a recent Reddit AMA:
https://www.reddit.com/r/blockfi/comments/st8xs9/ama_were_flori_marquez_founder_svp_of_operations/
-
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.
I own CRO and think they have big potential in the crypto banking space.
-
Relevant to this thread, it looks like Celsius may be in trouble:
https://blog.celsius.network/a-memo-to-the-celsius-community-59532a06ecc6
We are writing with a very important message for our community.
Due to extreme market conditions, today we are announcing that Celsius is pausing all withdrawals, Swap, and transfers between accounts.
-
Relevant to this thread, it looks like Celsius may be in trouble:
https://blog.celsius.network/a-memo-to-the-celsius-community-59532a06ecc6
We are writing with a very important message for our community.
Due to extreme market conditions, today we are announcing that Celsius is pausing all withdrawals, Swap, and transfers between accounts.
And the company mentioned at the start of the thread is cutting staff. I’m interested in how this will play out.
https://www.cnbc.com/2022/06/13/blockfi-cuts-20percent-of-its-staff-as-bitcoin-plunges.html
-
Relevant to this thread, it looks like Celsius may be in trouble:
https://blog.celsius.network/a-memo-to-the-celsius-community-59532a06ecc6
We are writing with a very important message for our community.
Due to extreme market conditions, today we are announcing that Celsius is pausing all withdrawals, Swap, and transfers between accounts.
And the company mentioned at the start of the thread is cutting staff. I’m interested in how this will play out.
https://www.cnbc.com/2022/06/13/blockfi-cuts-20percent-of-its-staff-as-bitcoin-plunges.html
Surprisingly, you need to be more specific about which crypto company is firing 20% of it's staff. I think you're referring to BlockFi. Coinbase just fired 20% of their staff.
https://www.newsweek.com/coinbase-fires-18-percent-workers-via-personal-email-after-crypto-crash-1715876
-
Update:
- Voyager has also suspended withdrawals (and deactivated debit cards): https://www.investvoyager.com/blog/voyager-update-july-1-2022/
- BlockFi got a bailout from FTX: https://blockfi.com/blockfi-signs-term-sheet-with-ftx
If you're eligible and haven't hit the $10k/year limit, consider buying Series I Savings Bonds instead: https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds.htm
-
Update:
- Voyager has also suspended withdrawals (and deactivated debit cards): https://www.investvoyager.com/blog/voyager-update-july-1-2022/
- BlockFi got a bailout from FTX: https://blockfi.com/blockfi-signs-term-sheet-with-ftx
If you're eligible and haven't hit the $10k/year limit, consider buying Series I Savings Bonds instead: https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds.htm
I put a few hundred bucks in Voyager as they were offering a deal for $100 of bitcoin for signing up. Albeit that was last year when Bitcoin was closer to $60k. So, it looks like I may have a write-off for taxes next year due to bad investments if they also fold. Good thing I didn't put more than I could afford to lose in that and 99%+ of my investments are still in broad market index funds.
-
Crypto appears to be going through its version of the Great Depression. "Institutions" are folding everywhere.
What's funny is how people are throwing up their hands and saying "oh well, you win some stupid bets and you lose some stupid bets." It's a totally different reaction than if they'd lost a fraction of the money in their USD bank account due to fraud or theft. People are losing thousands of dollars and treating it like just another day at the casino because deep down they knew it was a game of musical chairs.
However, their apathy is why the founders of crypto-firms will get away with their crimes. As I noted elsewhere on this forum, it is practically a sure thing that most of the "hacks" that hit these firms are inside jobs. Now we hear that the trading websites were loaning each other coins? Ha!
-
What's funny is how people are throwing up their hands and saying "oh well, you win some stupid bets and you lose some stupid bets." It's a totally different reaction than if they'd lost a fraction of the money in their USD bank account due to fraud or theft. People are losing thousands of dollars and treating it like just another day at the casino because deep down they knew it was a game of musical chairs.
I've gotta remember this one for the future:
People are reacting too well to losing their money because they understood the risks they were taking and so were mentally prepared not only for the good potential outcomes but also the bad ones.
-
What's funny is how people are throwing up their hands and saying "oh well, you win some stupid bets and you lose some stupid bets." It's a totally different reaction than if they'd lost a fraction of the money in their USD bank account due to fraud or theft. People are losing thousands of dollars and treating it like just another day at the casino because deep down they knew it was a game of musical chairs.
I've gotta remember this one for the future:
People are reacting too well to losing their money because they understood the risks they were taking and so were mentally prepared not only for the good potential outcomes but also the bad ones.
Yes, I think that there is actual academic research to show that the average crypto investor has a high risk tolerance and was also in other risky bets.
We find that cryptocurrency investors are more likely to trade penny-stocks and stocks featured in pump and dump schemes (Leuz et al., 2018). They are also more likely to participate in other investment vehicles with high idiosyncratic risk, such as emerging market, biotech, and solar-related ETFs. Comparing the portfolio return profiles of cryptocurrency and noncryptocurrency investors, we show that cryptocurrency investors have higher portfolio betas but lower portfolio efficiency, as measured by relative Sharpe ratio losses (Calvet et al., 2007). While the previous literature suggests that cryptocurrency can be used as a diversification instrument (Bouri et al., 2017), the cryptocurrency investors in our sample might underperform due to investment biases. We demonstrate that cryptocurrency investors are more prone to traditional investment biases, such as trend chasing and lottery-stock preferences. - Econstor: Who are the Bitcoin investors? Evidence from indirect cryptocurrency investments (https://www.econstor.eu/bitstream/10419/218737/1/1698687354.pdf)
-
Thanks for the Voyager notice, I was chatting with a co-worker who looks to be out about $10,000 because of that bankruptcy. I have exposure about that great (in cost basis) to gemini--about half of that in their stable coin--and I'm pondering whether I'm too exposed.
-
Thanks for the Voyager notice, I was chatting with a co-worker who looks to be out about $10,000 because of that bankruptcy. I have exposure about that great (in cost basis) to gemini--about half of that in their stable coin--and I'm pondering whether I'm too exposed.
Edit: I'm a day behind, they declared bankruptcy yesterday. I guess they didn't feel the need to email their customers that news.
Voyager doesn't appear to have declared bankruptcy yet. But apparently, they loaned hundreds of millions of dollars to a crypto investment fund that has declared bankruptcy. So, after digging through shell corporations and dealing with international law they may get something out of it, but it will take months or years and they may very well never see another dime.
So, it's not gone yet, but I'd say there's a fairly good chance my few hundred dollars, and you co-worker's $10k are gone.
-
Voyager did file for bankruptcy:
https://www.cnbc.com/2022/07/06/crypto-firm-voyager-digital-files-for-chapter-11-bankruptcy-protection.html
-
I have exposure about that great (in cost basis) to gemini--about half of that in their stable coin--and I'm pondering whether I'm too exposed.
I mostly got out of BlockFi as soon as the Celsius news broke. I had money at BlockFi and at Gemini, but kept my money at Gemini and still do. I actually feel for BlockFi because they did everything right with collateralization with 3AC and quickly liquidated those positions when it appears 3AC was outright lying about assets to every CeFi company. The combo of Celsius panic, plus a one-way exit from the platform with the SEC ruling earlier, made for a nasty bank run with no way for people to get back in until SEC approval. Anyway, I still have money at Gemini because the lend exclusively to Genesis. Genesis DID take a hit from 3AC https://www.coindesk.com/business/2022/07/06/genesis-confirms-3ac-exposure-dcg-assistance/ (https://www.coindesk.com/business/2022/07/06/genesis-confirms-3ac-exposure-dcg-assistance/) and confirmed by the CEO on Twitter, but they have much bigger pockets to absorb this sort of thing since the Genesis parent company is Digital Currency Group. See CEO thread https://twitter.com/michaelmoro/status/1537822423806009344 (https://twitter.com/michaelmoro/status/1537822423806009344). From what I gather, BlockFi was fully collateralized or overcollateralized with 3AC, but part of that collateral was GBTC, which was trading at 30% discount to NAV...so I guess not as collateralized as they originally were with there was a premium to NAV? At least, that's what I gather from posts and podcasts. Celsius felt like a ticking time bomb to me from the beginning. What I can't understand with Voyager, is why they would lend $650m to 3AC with zero collateral. Really? One single point of failure? Makes no sense
Right now my cash bucket looks like this:
10% checking
40% online savings
50% Gemini - GUSD
I might do more DeFi / smart contract / overcollateralized stuff like Notional.Finance as well. It takes the human folly part out of the equation at least (well, other than bad code), but I'm not sure I want the headache of keeping track of taxes with that or staking yet.
I feel for anyone who got burned by Celsius, Voyager, Vauld, Babel, etc. Not sure CeFi recovers
-
Voyager did file for bankruptcy:
https://www.cnbc.com/2022/07/06/crypto-firm-voyager-digital-files-for-chapter-11-bankruptcy-protection.html
My mistake. I guess I'm a day behind. Sounds like I may still get something out of it but I'm not going to hold my breath.
-
This was well worth the listen, for those who have dabbled with CeFi.
https://awealthofcommonsense.com/2022/07/talk-your-book-blockfi/ (https://awealthofcommonsense.com/2022/07/talk-your-book-blockfi/)
-
Here's a pretty insightful look at their loan balance sheet in regards to collateral. https://help.blockfi.com/hc/en-us/articles/4416057566228-What-are-the-risks-of-holding-my-crypto-at-BlockFi- (https://help.blockfi.com/hc/en-us/articles/4416057566228-What-are-the-risks-of-holding-my-crypto-at-BlockFi-)
So they aren't overcollateralized, but they aren't crazy under-collateralized either. $1.8 billion of loans not backed by collateral (or 20% of the BIA balance). This makes me feel a little better
In addition
"It is true that we do offer some institutional loans that have less or no collateral. For the past year we have taken to disclosing our net exposure for the public to see. The key is that we only offer under or uncollateralized loans to institutional clients after subjecting them to rigorous underwriting. Accordingly, they are counterparties of the highest caliber. To date, we have not seen any defaults from our unsecured institutional business."
"The BIA's are (and the BlockFi Yields will be) BlockFi corporate debt and will be treated as such in bankruptcy."
"The BIAs are unsecured credit of BlockFi. BlockFi does now and intends to, going forward, take on secured credit which may rank above customer assets in a bankruptcy. The key point is that we only make under or uncollateralized loans to institutional clients after rigorous underwriting. As a result, they are high-caliber counterparties. We have not seen any defaults from our unsecured institutional business to date."
Taken from a recent Reddit AMA actual promo code (https://parimatchbet.in/promo-code/):
https://www.reddit.com/r/blockfi/comments/st8xs9/ama_were_flori_marquez_founder_svp_of_operations/
True, we do provide some institutional loans with little or no collateral
-
Update since I've been active on this thread. I'm pretty much out of the CeFi interest account game now. I pulled the last of my stablecoins from Gemini Earn this week after the FTX / Alameda debacle. For their part, Genesis which is the counterparty facilitating the lending book for Gemini, posted this week and say they only lost $7m. https://twitter.com/GenesisTrading/status/1590391027214725120 (https://twitter.com/GenesisTrading/status/1590391027214725120). I have a tiny amount of bitcoin at BlockFi earning interest and the rest of my crypto is staked ETH on Gemini. A few contributing factors... 1) rates have gone down. Gemini is probably the easiest way to deploy new money without being an institutional investor and even if you use their stablecoins GUSD, it's now only 5.65% interest and 2) there are now far less risky assets that have similar interest rates. For example, 3 month t-bills that are over 4%. There's just too much contagion risk in crypto right now for the minimal difference in interest you can get. The good news is we're no longer in the TINA environment (there are no alternatives)
-
Update since I've been active on this thread. I'm pretty much out of the CeFi interest account game now. I pulled the last of my stablecoins from Gemini Earn this week after the FTX / Alameda debacle. For their part, Genesis which is the counterparty facilitating the lending book for Gemini, posted this week and say they only lost $7m. https://twitter.com/GenesisTrading/status/1590391027214725120 (https://twitter.com/GenesisTrading/status/1590391027214725120). I have a tiny amount of bitcoin at BlockFi earning interest and the rest of my crypto is staked ETH on Gemini. A few contributing factors... 1) rates have gone down. Gemini is probably the easiest way to deploy new money without being an institutional investor and even if you use their stablecoins GUSD, it's now only 5.65% interest and 2) there are now far less risky assets that have similar interest rates. For example, 3 month t-bills that are over 4%. There's just too much contagion risk in crypto right now for the minimal difference in interest you can get. The good news is we're no longer in the TINA environment (there are no alternatives)
Yea this whole FTX thing looks a lot like the start of the Panic of 1907, another era before regulations on what bankers could do with their depositors' money. It's a classic bank run, and with Binance out of the picture, and perhaps struggling to cover their own exposures, there is no equivalent of J.P. Morgan to organize a recapitalization this time. Binance looked at the books and ran the other direction, but I wonder if that was because of similarities in business practices rather than differences.
A lesson about bank runs is that they rarely stay confined to just one bank. FTX was reportedly capitalized in dollar terms by Softbank, Blackrock, Sequoia Capital, pension funds(!), and Tiger Global Management. One has to wonder which of these firms will face a liquidity issue next, and whether their losses will transmit to the major investment banks.
Still, you're right that the era of TINA is over. I was looking at investment grade corporate bonds from profitable companies yielding 7.5% to 8% this morning. That's an order of magnitude safer than trying to earn interest on probably-manipulated crypto. What's the point of jumping into such a gamble now?
-
well there you go...
https://twitter.com/BlockFi/status/1590875997351866368/photo/1 (https://twitter.com/BlockFi/status/1590875997351866368/photo/1)
and Genesis update https://twitter.com/GenesisTrading/status/1590836594382032896 (https://twitter.com/GenesisTrading/status/1590836594382032896)
-
well there you go...
https://twitter.com/BlockFi/status/1590875997351866368/photo/1 (https://twitter.com/BlockFi/status/1590875997351866368/photo/1)
and Genesis update https://twitter.com/GenesisTrading/status/1590836594382032896 (https://twitter.com/GenesisTrading/status/1590836594382032896)
That Genesis tweet is almost in the same style as all of the others that were made 1 to 3 days before meltdown
-
It seems like various crypto exchanges have money at risk, but for most it's not enough to shut down their normal operations.
https://www.coindesk.com/business/2022/11/09/who-still-has-exposure-to-ftx/
-
I left some money in there. Not enough to set me back sigfnificantly, but enough to sting and bother me quite a bit. I Cannot get it out and am feeling pretty dumb about it. I expect total loss of my funds. I used to be into crypto years ago and I am familiar that not your keys not your coins. The problem with personal wallets is that they are a massive hassle and require firmware updates. My experience with usb crypto wallets is that they can be as much hassle as rental properties
I believe after this I am completely done with crypto aside from whatever exposure index funds have to it. With a busy career I don’t have time to watch my ass for the next scam or bankruptcy 24/7.
-
When I decided that that cryptocurrency will probably damage the USD's standing as the global reserve currency, I dumped the small amount I had making 6%. Maybe it was the wrong reason but at least I missed out on all this bad betting.
-
I wonder if people come back to gold/silver as stores of value as people keep getting burned over and over again on crypto?
-
I wonder if people come back to gold/silver as stores of value as people keep getting burned over and over again on crypto?
Total gold in circulation is ~200,000 tons which is $12.5 trillion in value at current prices vs all crypto at $850 billion ($3 trillion at peak valuation). Silver by itself is ~$1.2 trillion, and the value of all copper mined at current prices is $6 trillion. If crypto were a publicly traded company, it would be a single large-ish blue chip stock. One thing crypto is good at is sucking all of the air out of the room.
-
I wonder if people come back to gold/silver as stores of value as people keep getting burned over and over again on crypto?
Total gold in circulation is ~200,000 tons which is $12.5 trillion in value at current prices vs all crypto at $850 billion ($3 trillion at peak valuation). Silver by itself is ~$1.2 trillion, and the value of all copper mined at current prices is $6 trillion. If crypto were a publicly traded company, it would be a single large-ish blue chip stock. One thing crypto is good at is sucking all of the air out of the room.
Good point, also a lot of people and institutions are in the process of losing that $850bn so it’s not like that can all rotate into metals.
-
I believe after this I am completely done with crypto aside from whatever exposure index funds have to it. With a busy career I don’t have time to watch my ass for the next scam or bankruptcy 24/7.
I wonder how many other people feel this way. If the sentiment among current and former cryptocurrency owners is similar, it could mark the end of an investing fad. Comparisons of FTX and Enron seem to place us at about 2001 in a generational process of investors pulling back from risky and potentially fraudulent tech-adjacent investments.
For how many years before 2022 was it the smart advice to stick with the mainstream names like Bitcoin and FTX, because at least their future value was assured amid the ups and downs? Now it seems the whole concept is scammy or vulnerable, and the likelihood of people ever buying a stick of gum using a permanent-deflation cryptocurrency on a defi platform slips farther and farther away.
The difference between cryptocurrency and dot-com stocks was of course that at least some of the dot-coms had a bright future of value creation ahead of them despite what the stock market thought in 2003, while crypto and NFTs have only - until now - attracted speculative flows. There is no firewall between here and zero.
-
When I decided that that cryptocurrency will probably damage the USD's standing as the global reserve currency, ...
The top 5 countires have about half the world's GDP. Which of them have Bitcoin currency reserves? China banned it, and India considered banning it. I don't think Japan's or Germany's central banks have begun accumulating Bitcoin. Did you decide this without evidence?
-
The dollar is the world's reserve current for a lot of reasons, one of which is that the dollar is the world's reserve currency, with the Euro right up there. It is a lot easier to do international trade if both parties are using the same currency. And it is even better if both parties can turn around and do deals with different international partners using that same currency. Barely anyone uses Bitcoin for business transitions. It is not even a rounding error of a rounding error.
-
When I decided that that cryptocurrency will probably damage the USD's standing as the global reserve currency, ...
The top 5 countires have about half the world's GDP. Which of them have Bitcoin currency reserves? China banned it, and India considered banning it. I don't think Japan's or Germany's central banks have begun accumulating Bitcoin. Did you decide this without evidence?
It may not be succeeding at the moment, but isn't the ultimate goal to replace centralized fiat?
-
When I decided that that cryptocurrency will probably damage the USD's standing as the global reserve currency, ...
The top 5 countires have about half the world's GDP. Which of them have Bitcoin currency reserves? China banned it, and India considered banning it. I don't think Japan's or Germany's central banks have begun accumulating Bitcoin. Did you decide this without evidence?
It may not be succeeding at the moment, but isn't the ultimate goal to replace centralized fiat?
The ultimate goal was to enrich early adopters smart enough to sell when things started to take off. And is succeeded for a great many! I honestly don't believe there was any goal beyond that - just lies to convince the marks to prop up the value of the monopoly money.
-
When I decided that that cryptocurrency will probably damage the USD's standing as the global reserve currency, ...
The top 5 countires have about half the world's GDP. Which of them have Bitcoin currency reserves? China banned it, and India considered banning it. I don't think Japan's or Germany's central banks have begun accumulating Bitcoin. Did you decide this without evidence?
It may not be succeeding at the moment, but isn't the ultimate goal to replace centralized fiat?
I recall reading somewhere that the fundamental design of bitcoin was such that at most it could handle something like 6 transactions per second. That sounds like a lot until you think about the billions (trillions?) of transactions Visa, Mastercard, etc. process every year. I'm not sure how many per second that works out too- but it's certainly orders of magnitude greater. So, Bitcoin can never replace the dollar or Euro, it can maybe be something less frequently traded like gold or silver - but it can't be a currency used for everyday transactions.
-
When I decided that that cryptocurrency will probably damage the USD's standing as the global reserve currency, ...
The top 5 countires have about half the world's GDP. Which of them have Bitcoin currency reserves? China banned it, and India considered banning it. I don't think Japan's or Germany's central banks have begun accumulating Bitcoin. Did you decide this without evidence?
It may not be succeeding at the moment, but isn't the ultimate goal to replace centralized fiat?
The ultimate goal was to enrich early adopters smart enough to sell when things started to take off. And is succeeded for a great many! I honestly don't believe there was any goal beyond that - just lies to convince the marks to prop up the value of the monopoly money.
There are many libertarian-leaning tech-utopians involved as well that are probably true-believers in crypto, e.g. Vitalik Buterin (https://www.youtube.com/watch?v=j7MeJionPMA). Not everyone involved is a criminal; some of them are merely deluded and/or naive. Everyone agrees that Buterin, and many others involved, are quite smart (maybe this is a fairer video to share (https://www.youtube.com/watch?v=XW0QZmtbjvs)), which--given the opportunity costs--makes their utopian pursuit of crypto that much more tragic. (disclaimer: I'm very much a crypto-skeptic and could easily be wrong; maybe smart contracts on the blockchain will save the world some day)
-
When I decided that that cryptocurrency will probably damage the USD's standing as the global reserve currency, ...
The top 5 countires have about half the world's GDP. Which of them have Bitcoin currency reserves? China banned it, and India considered banning it. I don't think Japan's or Germany's central banks have begun accumulating Bitcoin. Did you decide this without evidence?
It may not be succeeding at the moment, but isn't the ultimate goal to replace centralized fiat?
You answered my question with a question, so let me ask again: what evidence shows the US dollar being replaced by Bitcoin or crypto as the global reserve currency?
-
When I decided that that cryptocurrency will probably damage the USD's standing as the global reserve currency, ...
The top 5 countires have about half the world's GDP. Which of them have Bitcoin currency reserves? China banned it, and India considered banning it. I don't think Japan's or Germany's central banks have begun accumulating Bitcoin. Did you decide this without evidence?
It may not be succeeding at the moment, but isn't the ultimate goal to replace centralized fiat?
You answered my question with a question, so let me ask again: what evidence shows the US dollar being replaced by Bitcoin or crypto as the global reserve currency?
I am not talking about this year or next but maybe in a few decades. I believe the US is on the decline side of the cycle as evidenced by an attempted coup, divided populace at each other's throats, inflation, massive debt, huge military budget yet unsuccessful military campaigns, expensive workforce and low participation, failing/dated infrastructure, unhealthy population and great wealth divide. The whole Dalio shebang. This is why the dollar will fall out and be replaced by something in the minds of people all over the world and that could very possibly be crypto. I catch the anti-US drift ever present in crypto-chat. So I just don't think it is beneficial and is possibly harmful to the US dollar in the long term. It is also one reason other countries such as China have banned it. They would prefer the next reserve currency be their own, I bet.
-
When I decided that that cryptocurrency will probably damage the USD's standing as the global reserve currency, ...
The top 5 countires have about half the world's GDP. Which of them have Bitcoin currency reserves? China banned it, and India considered banning it. I don't think Japan's or Germany's central banks have begun accumulating Bitcoin. Did you decide this without evidence?
It may not be succeeding at the moment, but isn't the ultimate goal to replace centralized fiat?
You answered my question with a question, so let me ask again: what evidence shows the US dollar being replaced by Bitcoin or crypto as the global reserve currency?
I am not talking about this year or next but maybe in a few decades. I believe the US is on the decline side of the cycle as evidenced by an attempted coup, divided populace at each other's throats, inflation, massive debt, huge military budget yet unsuccessful military campaigns, expensive workforce and low participation, failing/dated infrastructure, unhealthy population and great wealth divide. The whole Dalio shebang. This is why the dollar will fall out and be replaced by something in the minds of people all over the world and that could very possibly be crypto. I catch the anti-US drift ever present in crypto-chat. So I just don't think it is beneficial and is possibly harmful to the US dollar in the long term. It is also one reason other countries such as China have banned it. They would prefer the next reserve currency be their own, I bet.
That's interesting. In your view, various problems in the U.S. are risks to the US dollar, which in turn will convince other countries to find an alternative. It sounds like you assume a better alternative will be found, but I think that's the whole problem. The dollar has made strong gains against both the Euro and Chinese Yuan... so inflation seems to favor the US dollar, rather than being seen as a weak spot for the US (side note: inflation is worse in Europe).
China has limited currency outflows at various times, which makes it unusable as a reserve currency. If you owe a debt in Chinese Yuan, and China won't let you buy Yuan to repay it, you're going to have a big problem. US Treasuries are the most liquid (free flowing) market, which helps them as a reserve currency.
Bitcoin lost 75% of it's value from its peak, so anyone buying things with Bitcoin has seen +300% inflation. Compare that wild swing with the level of inflation in the 7-8% range, which is already making people angry. How angry would people be over +300% inflation? And that's why I don't view Bitcoin as a currency, and it can't really function as one. I haven't heard of it being successfully adopted as a currency - even in Ecuador, where people simply emptied their accounts and ignored it.
-
When I decided that that cryptocurrency will probably damage the USD's standing as the global reserve currency, ...
The top 5 countires have about half the world's GDP. Which of them have Bitcoin currency reserves? China banned it, and India considered banning it. I don't think Japan's or Germany's central banks have begun accumulating Bitcoin. Did you decide this without evidence?
It may not be succeeding at the moment, but isn't the ultimate goal to replace centralized fiat?
You answered my question with a question, so let me ask again: what evidence shows the US dollar being replaced by Bitcoin or crypto as the global reserve currency?
I am not talking about this year or next but maybe in a few decades. I believe the US is on the decline side of the cycle as evidenced by an attempted coup, divided populace at each other's throats, inflation, massive debt, huge military budget yet unsuccessful military campaigns, expensive workforce and low participation, failing/dated infrastructure, unhealthy population and great wealth divide. The whole Dalio shebang. This is why the dollar will fall out and be replaced by something in the minds of people all over the world and that could very possibly be crypto. I catch the anti-US drift ever present in crypto-chat. So I just don't think it is beneficial and is possibly harmful to the US dollar in the long term. It is also one reason other countries such as China have banned it. They would prefer the next reserve currency be their own, I bet.
The whole Dalio thing is that superpowers rise and fall in cycles and if another besides the US will emerge the odds that they don’t want control of the currency is about 0.0%.
-
It may not be succeeding at the moment, but isn't the ultimate goal to replace centralized fiat?
That may be the goal, but what is the plan? Almost everybody accepts dollars, virtually nobody accepts Bitcoin. If I want to sell wheat to say, Germany and use the proceeds to buy gas from Norway, who wants to buy electronics from China, the whole round trip transaction can be conducted dollars because everybody already accepts dollars. Can't be done in Bitcoin. So there is a momentum problem. To put it another way, nobody uses Bitcoin so nobody wants to use Bitcoin.
But it is worse than that. Let's say I set up contract to buy XX cubic meters of natural gas each month for a year from you, and in exchange of I send you Z amount of Bitcoin each month. Problem is, Bitcoin is a hyperinflating currency, losing over 75% of its value this year. What was a fair deal at the first of the year is now an unworkable deal. You can't have a hyperinflating reserve currency. And Bitcoin can hyperdeflate too, which in some ways in even worse. It is impossible to have future contracts denominated in Bitcoin. That makes it unusable as a currency except for small, immediate transactions.
On top of that, due to its poor design the Bitcoin blockchain can only process about five transactions a second. That's barely enough for your local mall and many orders of magnitude too little for what is required for a reserve currency.
Bitcoin maximalists talk about it becoming a reserve currency, but it is literally impossible.
-
When I decided that that cryptocurrency will probably damage the USD's standing as the global reserve currency, ...
The top 5 countires have about half the world's GDP. Which of them have Bitcoin currency reserves? China banned it, and India considered banning it. I don't think Japan's or Germany's central banks have begun accumulating Bitcoin. Did you decide this without evidence?
It may not be succeeding at the moment, but isn't the ultimate goal to replace centralized fiat?
You answered my question with a question, so let me ask again: what evidence shows the US dollar being replaced by Bitcoin or crypto as the global reserve currency?
I am not talking about this year or next but maybe in a few decades. I believe the US is on the decline side of the cycle as evidenced by an attempted coup, divided populace at each other's throats, inflation, massive debt, huge military budget yet unsuccessful military campaigns, expensive workforce and low participation, failing/dated infrastructure, unhealthy population and great wealth divide. The whole Dalio shebang. This is why the dollar will fall out and be replaced by something in the minds of people all over the world and that could very possibly be crypto. I catch the anti-US drift ever present in crypto-chat. So I just don't think it is beneficial and is possibly harmful to the US dollar in the long term. It is also one reason other countries such as China have banned it. They would prefer the next reserve currency be their own, I bet.
This reminds me of the Churchill quote, “democracy is the worst form of government – except for all the others that have been tried.”
For all the problems in the US, there's really no other major country doing better.
China, Russia, India, Japan, Brazil, EU, etc.
All of them have similar serious structural problems. Some are doing better than the US in those areas; some are doing worse. Inflation is worse in the EU. Most of those countries are facing serious demographic problems and, in some cases, have started to see population declines. Japan's national debt is worse than the US. China is watching its economy slowly implode as the real estate market has finally started to come to terms with the reality that a half-finished empty apartment unit in an empty poorly built building is not going to keep increasing in value - and may ultimately be almost worthless. Russia has just watched a significant portion of its military get wiped out including literally thousands of pieces of equipment (tanks, trucks, artillery, etc.) and easily tens of thousands of Soldiers in just 9 months. Compare that to US losses of about 7,000 over 20 years of fighting since 9/11.
I see nothing on the horizon in the next few decades that is going to knock the US off the top of the mountain. Not to the point that USD ceases to be the reserve currency for most of the world.
-
And now another big shoe drops...
Genesis illiquid which means Gemini Earn withdrawals are halted.
https://twitter.com/GenesisTrading/status/1592867198900768769 (https://twitter.com/GenesisTrading/status/1592867198900768769)
https://twitter.com/Gemini/status/1592873279232278532 (https://twitter.com/Gemini/status/1592873279232278532)
-
And now another big shoe drops...
Genesis illiquid which means Gemini Earn withdrawals are halted.
https://twitter.com/GenesisTrading/status/1592867198900768769 (https://twitter.com/GenesisTrading/status/1592867198900768769)
https://twitter.com/Gemini/status/1592873279232278532 (https://twitter.com/Gemini/status/1592873279232278532)
Somebody talk me out of a bear spread on BITO.
-
I don't hate it as a short term trade. You'd think there will be lots of forced liquidations going on for awhile as the risk spreads. I'm kind of amazed Bitcoin isn't getting crushed more than this right now to be honest. The thing is, crypto would have spiked with the better than expected inflation report if it weren't for FTX. I know, I know, it's supposed to be an inflation hedge...but let's not kid ourselves at this point.
-
I'm kind of amazed Bitcoin isn't getting crushed more than this right now to be honest.
I would be shocked if there isn't widespread price manipulation going on.
-
I imagine the reason it is not worse is because no one can withdraw.
If blockfi, Gemini, genesis, etc all lifted freezes at once then many billions would be sold at once. If I had access to my measly 0.1 btc I’d sell it immediately lol
Also wondering if any ¡not your key not your coins! guys are not selling because they are afraid to send money to an exchange
-
I really hope taxpayers don't end up paying for some sort of bail-out.
-
I imagine the reason it is not worse is because no one can withdraw.
If blockfi, Gemini, genesis, etc all lifted freezes at once then many billions would be sold at once. If I had access to my measly 0.1 btc I’d sell it immediately lol
Also wondering if any ¡not your key not your coins! guys are not selling because they are afraid to send money to an exchange
For the second time, someone please try to talk me out of a bear spread on BITO.
-
I imagine the reason it is not worse is because no one can withdraw.
If blockfi, Gemini, genesis, etc all lifted freezes at once then many billions would be sold at once. If I had access to my measly 0.1 btc I’d sell it immediately lol
Also wondering if any ¡not your key not your coins! guys are not selling because they are afraid to send money to an exchange
For the second time, someone please try to talk me out of a bear spread on BITO.
I'm not too familiar with bear spreads, but if you're looking for a green light to short Bitcoin futures i.e. profit in a falling Bitcoin market then I'd say 'fire away'.
I can't see any short term catalysts to move the Bitcoin market upwards (Fed slows pace of rate hikes?).
I can envisage many short term catalysts to move the Bitcoin markets downwards. (another exchange or two blow up, cascading bankruptcies of other crypto entities, rising interest rates, Bitcoin miners puking up their inventory, FBI selling seized Bitcoin https://www.cnbc.com/2022/11/07/feds-seize-3point36-billion-in-bitcoin-the-second-largest-recovery-so-far.html (https://www.cnbc.com/2022/11/07/feds-seize-3point36-billion-in-bitcoin-the-second-largest-recovery-so-far.html), etc).
-
I imagine the reason it is not worse is because no one can withdraw.
If blockfi, Gemini, genesis, etc all lifted freezes at once then many billions would be sold at once. If I had access to my measly 0.1 btc I’d sell it immediately lol
Also wondering if any ¡not your key not your coins! guys are not selling because they are afraid to send money to an exchange
For the second time, someone please try to talk me out of a bear spread on BITO.
CNBC's ETF Edge recently interviewed ProShares, who created BITO. They talked about how the Bitcoin Futures market and BITO ETF had held up structurally even as Bitcoin's price crashed. He also mentioned the roll costs have come down significantly, and now have reached their theoretical minimum: a roll cost equal to short term interest rates. Apparently BITO holds futures + cash, and the cash earns about the amount needed for roll costs.
Which I mention because there's a second fund, BITI, that tracks the inverse of Bitcoin. It sounds like that might be the most efficient way to get inverse exposure to Bitcoin.
Back when I shorted Bitcoin, BITI didn't exist, so I shorted GBTC and some crypto related stocks. You could also buy PUT options on crypto related stocks like Coinbase (COIN), although yesterday would have been better: it fell 12%.
-
I imagine the reason it is not worse is because no one can withdraw.
If blockfi, Gemini, genesis, etc all lifted freezes at once then many billions would be sold at once. If I had access to my measly 0.1 btc I’d sell it immediately lol
Also wondering if any ¡not your key not your coins! guys are not selling because they are afraid to send money to an exchange
For the second time, someone please try to talk me out of a bear spread on BITO.
CNBC's ETF Edge recently interviewed ProShares, who created BITO. They talked about how the Bitcoin Futures market and BITO ETF had held up structurally even as Bitcoin's price crashed. He also mentioned the roll costs have come down significantly, and now have reached their theoretical minimum: a roll cost equal to short term interest rates. Apparently BITO holds futures + cash, and the cash earns about the amount needed for roll costs.
Which I mention because there's a second fund, BITI, that tracks the inverse of Bitcoin. It sounds like that might be the most efficient way to get inverse exposure to Bitcoin.
Back when I shorted Bitcoin, BITI didn't exist, so I shorted GBTC and some crypto related stocks. You could also buy PUT options on crypto related stocks like Coinbase (COIN), although yesterday would have been better: it fell 12%.
Good info. Thanks! BITI was not on my "short ideas" watchlist. Looks like it came out in June.
Looks like there is also a reasonably liquid options market on BITI, so a bitbear could potentially earn fat put premiums while waiting to buy BITI.
-
PTF
-
Revisiting "The key point is that we only make under or uncollateralized loans to institutional clients after rigorous underwriting."
Meanwhile, reading through some of the bankruptcy court filings...
https://twitter.com/GRDecter/status/1593272102047580161 (https://twitter.com/GRDecter/status/1593272102047580161)
Here's a pretty insightful look at their loan balance sheet in regards to collateral. https://help.blockfi.com/hc/en-us/articles/4416057566228-What-are-the-risks-of-holding-my-crypto-at-BlockFi- (https://help.blockfi.com/hc/en-us/articles/4416057566228-What-are-the-risks-of-holding-my-crypto-at-BlockFi-)
So they aren't overcollateralized, but they aren't crazy under-collateralized either. $1.8 billion of loans not backed by collateral (or 20% of the BIA balance). This makes me feel a little better
In addition
"It is true that we do offer some institutional loans that have less or no collateral. For the past year we have taken to disclosing our net exposure for the public to see. The key is that we only offer under or uncollateralized loans to institutional clients after subjecting them to rigorous underwriting. Accordingly, they are counterparties of the highest caliber. To date, we have not seen any defaults from our unsecured institutional business."
"The BIA's are (and the BlockFi Yields will be) BlockFi corporate debt and will be treated as such in bankruptcy."
"The BIAs are unsecured credit of BlockFi. BlockFi does now and intends to, going forward, take on secured credit which may rank above customer assets in a bankruptcy. The key point is that we only make under or uncollateralized loans to institutional clients after rigorous underwriting. As a result, they are high-caliber counterparties. We have not seen any defaults from our unsecured institutional business to date."
Taken from a recent Reddit AMA actual promo code (https://parimatchbet.in/promo-code/):
https://www.reddit.com/r/blockfi/comments/st8xs9/ama_were_flori_marquez_founder_svp_of_operations/
True, we do provide some institutional loans with little or no collateral
-
Here's a very good theoretical overview of what's going on in the crypto markets:
https://www.youtube.com/watch?v=aj2UZ31aIUA (https://www.youtube.com/watch?v=aj2UZ31aIUA)
-
Here's a very good theoretical overview of what's going on in the crypto markets:
https://www.youtube.com/watch?v=aj2UZ31aIUA (https://www.youtube.com/watch?v=aj2UZ31aIUA)
Thanks for this link, was very interesting!
-
Here's a very good theoretical overview of what's going on in the crypto markets:
https://www.youtube.com/watch?v=aj2UZ31aIUA (https://www.youtube.com/watch?v=aj2UZ31aIUA)
Thanks for this link, was very interesting!
Seems like a reasoned interpretation of the crypto market.