Anyone using crypto exchanges to earn higher interest on their cash?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
MBB_Boy
Posts: 191
Joined: Sat May 12, 2018 4:09 pm

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by MBB_Boy »

typical.investor wrote: Sun Aug 09, 2020 10:23 pm
tman9999 wrote: Sun Aug 09, 2020 9:45 pm
typical.investor wrote: Sun Aug 09, 2020 9:16 pm
Claims that very risky loans are "guaranteed" and "can't default" to me is purely disinformation. You are just repeating the claims by industry insiders that really are designed to funnel more money into crypto without consideration for actual risk.
I didn’t say “guaranteed”. I said 100%+ collateralized with an auto-liquidate trigger. I don’t know enough about how that works in practice, but that’s my understanding of how it’s set up.
Proponents in this thread have said "a guaranteed rate of 8.6%". I am pointing out that the 100%+ collateralization provides no actual guarantee.
tman9999 wrote: Sun Aug 09, 2020 9:45 pm Do you have any knowledge about how such a trigger could fail, leaving the lender holding the bag? I don’t- big part of why I’m asking.
Taking out loans collateralized by cryptos to invest more in cryptos. What could go wrong????

Take your example of 140% collateralization, and suppose the trigger is at 100%. If the value of coins drop and there are outflows for whatever reason (case of fraud in the news, unfavorable legislation, need to raise funds etc), those borrowing (and those holding coins to a lesser degree) know the trigger will be approaching. Big holders might want to get out knowing that doing so may move the market downward, and they can likely get back in later after a crash.

Anyway, look at municipal bonds recently. They crashed hard in March and not only or mainly from COVID induced credit risk. Municipal bond money market funds often take short term bonds and place them as collateral in trusts which use them to borrow funds and invest in longer term, higher yielding bonds. When investors rushed to liquidate their money market funds (needing cash in the COVID crisis), those trusts had their collateral withdrawn and they were forced to sell their longer term holdings. This impacted the market overall. Then many concluded that the market was saying the credit risk of munis were being shown in market prices to be very high. So more people left munis out of credit risk fears which was being confused with the liquidity issues.

You are talking about miners and VC's with large positions in cryptos taking out loans. Given that their all liquidating cryptos at the same time if triggers are hit will definitely move the market downward, I fully expect them to sell early in order to avoid it. That threat itself could push things below the trigger levels if things get sketchy.

Just look at what happened in Black (not appropriate use of that term perhaps but that is what it is called) Monday. Insurance products had triggers to sell out of the market to protect against loss, and thus the snowball began.

I’m not saying the risk can’t pay off by the way; I am saying the risk can show up and 150% collatoralization might not save you.

I can’t tell which will happen.
What do you mean taking out loans collateralized by crypto to invest in more crypto? My understanding is that the loans they make are in USD, and the crypto is the insurance in case borrower defaults. Do you mean you think the borrower uses the money to buy more crypto? Possible
barnaclebob
Posts: 4214
Joined: Thu Aug 09, 2012 10:54 am

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by barnaclebob »

kbjeffrey wrote: Fri Aug 07, 2020 5:09 pm I've put some money into AnchorUSD. They say they offer "upto 8%" in interest on the first $5,000 you invest. It looked reasonably reliable to me:

- https://www.anchorusd.com/
- https://www.investopedia.com/news/ibm-l ... red-banks/.

I figure that in the very worst case, I'll loose 5k. In the best case, I'll actually earn some interest on my cash. Right now I'm getting 7.88%
See this is the problems with these types of schemes. You get 8% returns on 5k. Big deal, thats a nice dinner. Nobody is going to get rich or build a retirement off that. But, somebody will lose nearly everything they have deposited when the jack and the box goes off. If you don't think this scheme will last nearly a decade before something gives then you are just playing hot potato.
Topic Author
tman9999
Posts: 71
Joined: Tue May 20, 2008 1:06 pm

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by tman9999 »

barnaclebob wrote: Tue Aug 11, 2020 8:37 am
kbjeffrey wrote: Fri Aug 07, 2020 5:09 pm I've put some money into AnchorUSD. They say they offer "upto 8%" in interest on the first $5,000 you invest. It looked reasonably reliable to me:

- https://www.anchorusd.com/
- https://www.investopedia.com/news/ibm-l ... red-banks/.

I figure that in the very worst case, I'll loose 5k. In the best case, I'll actually earn some interest on my cash. Right now I'm getting 7.88%
See this is the problems with these types of schemes. You get 8% returns on 5k. Big deal, thats a nice dinner. Nobody is going to get rich or build a retirement off that. But, somebody will lose nearly everything they have deposited when the jack and the box goes off. If you don't think this scheme will last nearly a decade before something gives then you are just playing hot potato.
While I don't know that I'd refer to getting involved in crypto currency holding and trading as a "scheme", I certainly take your point. Even with all the safeguards previously mentioned in this thread, the lack of FDIC or other federally-backed insurance on accounts means that if anything goes wrong, you're screwed. And therefore a smart investor would be conservative about putting a significant portion of their portfolio into this vehicle. At that point, you do have to ask yourself, "what's the point?" (OTOH, who wouldn't move their entire portfolio into a sure 8% yield with 0 risk??).

I guess optimistic me figures it like this:
1. yes, it's early days, and much needs to be worked out.
2. but rather than wait for everything to be perfect, get involved now in a small way in order to learn how it works, and already be set up and ready to as/when things become more assured.
3. then, when things have sorted themselves out and crypto has been integrated into the existing banking system, a) I'll know about it because I've been following it; and b) I'll be ready to take full advantage of whatever the latest offerings are at that time.
Topic Author
tman9999
Posts: 71
Joined: Tue May 20, 2008 1:06 pm

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by tman9999 »

MBB_Boy wrote: Mon Aug 10, 2020 4:07 pm OP,

Thanks for raising the topic. I was an early adopter / investor in a few different crypto assets, and am up a bunch even after the big crash (but boy do I wish I had cashed more out!).
Yw. I know a few people in similar boat (early BTC buyers). I wish I had bought just one back in early days - just so I could say I did it.
MBB_Boy wrote: Mon Aug 10, 2020 4:07 pm The stablecoin investments at the ~8% are also interesting. GUSD is the stablecoin backed by Gemini, which as I already mentioned is regulated by an aggressive entity. I would feel pretty confident in them. USDC is issued by Coinbase, also regulated by the same entity. Turning some $ into those assets and then lending it out at 8% is still risky, but not scam level risky IMO.
That's what I'm trying to figure out - what do you see as the sources of risk, going onto one of the big defi platforms and making an 8% P2P loan?
MBB_Boy wrote: Mon Aug 10, 2020 4:07 pm I used to dabble in P2P lending, and I view this in the same vein. This at least has the advantage of allowing you to withdraw whenever you want, instead of being invested for a 3-5 year term. I have not decided on whether I am interested in pursuing this - it's apples / oranges from my decision to invest crypto assets.
So why did you decide to invest in crypto assets??
MBB_Boy wrote: Mon Aug 10, 2020 4:07 pm All this said, I don't view this as being a true "DeFi" application. Also, many things about this run counter to the "true" spirit of crypto - working with a centralized, regulated entitity that requires proof of identity (e.g., SSN and driver's license, just like a bank) and then turning over your crypto assets directly (not your keys, not your assets!) is basically violating the first two rules of crypto. HOWEVER, there's still a money making opportunity here, and one that falls within my risk tolerance (again, comparable to P2P in a lot of ways).
Which "this" are you referring to, that isn't a true "DeFi" application? And how, then, would you define a true defi application?
MBB_Boy wrote: Mon Aug 10, 2020 4:07 pm And of course, when the interest rates presumably drop as enough interest builds that they can lower their cost of capital, I will re-assess. Part of the reason the interest rate is so high is that many people are skeptical. After it normalizes (and assuming nothing blows up), that will change and the rate of return will change accordingly. As it should.
Let's say the cost of capital drops along with interest rates. What about that would cause you to reassess?

Thanks so much for posting up - really appreciate you sharing your insight and thoughts about this.
ship_at_sea
Posts: 17
Joined: Thu Sep 26, 2019 2:01 pm

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by ship_at_sea »

tman9999 wrote: Wed Aug 12, 2020 10:48 am I guess optimistic me figures it like this:
1. yes, it's early days, and much needs to be worked out.
2. but rather than wait for everything to be perfect, get involved now in a small way in order to learn how it works, and already be set up and ready to as/when things become more assured.
3. then, when things have sorted themselves out and crypto has been integrated into the existing banking system, a) I'll know about it because I've been following it; and b) I'll be ready to take full advantage of whatever the latest offerings are at that time.
There are a LOT of assumptions in this block.

1) Yes, it's early. It was early a decade ago and it's still early now. Let's assume that this isn't an outright scam, and the organization honestly intends to continue to pay out 8% interest indefinitely. Do we have any examples of this type of offer successfully surviving in crypto for even 5 years? I take it as certainty that money I put into my bank will still be there. What are the odds your investment and all your interest won't just vanish?

2) I don't know what "get involved now to learn how it works" means. Do you think that depositing money and earning interest on it is going to be educational? Or do you expect events of educational value to happen? Can you give examples of what these events would be? And why do they require you to invest money, rather than just observing? Yes, I see that you're doing some research, and that it seems your conclusion is "I don't see how this could possibly fail." I would categorize this as "I don't know what I don't know", which is an incredibly dangerous place to be. I don't know how USDC could be a scam, or could fail, but I don't think my ignorance means it is a safe investment.

3) This is assuming that crypto will be integrated into the existing banking system , and that its integration will somehow create profitable opportunities for crypto as a whole, and that having deposited money into crypto at an earlier time will give you some unique insight to capitalize on this integration. As you said, this sounds very optimistic.
Topic Author
tman9999
Posts: 71
Joined: Tue May 20, 2008 1:06 pm

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by tman9999 »

ship_at_sea wrote: Wed Aug 12, 2020 11:30 am
tman9999 wrote: Wed Aug 12, 2020 10:48 am I guess optimistic me figures it like this:
1. yes, it's early days, and much needs to be worked out.
2. but rather than wait for everything to be perfect, get involved now in a small way in order to learn how it works, and already be set up and ready to as/when things become more assured.
3. then, when things have sorted themselves out and crypto has been integrated into the existing banking system, a) I'll know about it because I've been following it; and b) I'll be ready to take full advantage of whatever the latest offerings are at that time.
There are a LOT of assumptions in this block.

1) Yes, it's early. It was early a decade ago and it's still early now. Let's assume that this isn't an outright scam, and the organization honestly intends to continue to pay out 8% interest indefinitely. Do we have any examples of this type of offer successfully surviving in crypto for even 5 years? I take it as certainty that money I put into my bank will still be there. What are the odds your investment and all your interest won't just vanish?

2) I don't know what "get involved now to learn how it works" means. Do you think that depositing money and earning interest on it is going to be educational? Or do you expect events of educational value to happen? Can you give examples of what these events would be? And why do they require you to invest money, rather than just observing? Yes, I see that you're doing some research, and that it seems your conclusion is "I don't see how this could possibly fail." I would categorize this as "I don't know what I don't know", which is an incredibly dangerous place to be. I don't know how USDC could be a scam, or could fail, but I don't think my ignorance means it is a safe investment.

3) This is assuming that crypto will be integrated into the existing banking system , and that its integration will somehow create profitable opportunities for crypto as a whole, and that having deposited money into crypto at an earlier time will give you some unique insight to capitalize on this integration. As you said, this sounds very optimistic.
1. You keep saying it was a decade ago. While that may be true for Bitcoin (2009), in my view Bitcoin is not equivalent to or representative of what is now "the crypto market." The way I think about it, "modern" era of crypto is about two years old. USDC was issued by Circle in September of 2018. I'm not saying USDC = the modern crypto market, any more than I think Bitcoin is. But it is more representative of the diversification of what crypto might be. Stablecoins weren't a thing, or weren't widely known about at any rate, when BTC was introduced. I'm not an historian, and have no immediate need to create the timeline of the crypto industry. My point is that the current activity and evolution of the crypto market - call it crypto 2.0 - is about two years old. And BTC, while a major piece of total crypto assets, is not what crypto is about. It's more like the role gold has in an investment world filled with bonds or equities. I (and many others) believe it will become even moreso going forward.

2. Don't know about you, but I learn by doing. What's a crypto wallet? How do I get one? Is it safe? Is it ok to connect it to my real bank account? What's Plaid? What's Wyre? Are these safe? How come they want me to give them all this info. How do I get crypto? What do I do with the crypto once I've got it? What's Ether? Do I need that? How do I change one type of crypto to another type? Which one is good? How much does doing that cost?

Sure, you can read blogs and watch YouTubes for a few days (or weeks) and start to get answers to these questions - assuming you are smart enough to know to ask them).

Or, you can try to figure out how to take $100 out of your bank account and buy some crypto with it. Where does it go? How do you move it? Does it cost anything to move? Then what happens? How much interest does it actually earn?

These are all things I knew nothing about before I actually tried it for myself with $100 of real money. Along the way I grew more comfortable with setting up and using the systems and platforms that are needed. That's a learning curve. I couldn't have gotten there just reading about it in the abstract. And I probably wouldn't have thought to seek out answers to some of the questions that came up along the way as a result of trying it for myself.

3. I'm optimistic, but cautiously so. Certainly not thinking there's no way this could fail, that's for sure. I accept I don't know what I don't know - ergo this thread. But I do like learning and embracing innovations; and throughout my life I've been pretty good about spotting promising new stuff and choosing to learn about it before others do. Doesn't mean I always get it right, or have really made any serious money as a result of it (except once, a little bit). I just view this as an interesting new area that shows great promise in being a disruptor of a staid, stodgy, extractive industry that is ripe for and overdue for disruption. We shall see.
MBB_Boy
Posts: 191
Joined: Sat May 12, 2018 4:09 pm

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by MBB_Boy »

tman9999 wrote: Wed Aug 12, 2020 10:59 am
MBB_Boy wrote: Mon Aug 10, 2020 4:07 pm The stablecoin investments at the ~8% are also interesting. GUSD is the stablecoin backed by Gemini, which as I already mentioned is regulated by an aggressive entity. I would feel pretty confident in them. USDC is issued by Coinbase, also regulated by the same entity. Turning some $ into those assets and then lending it out at 8% is still risky, but not scam level risky IMO.
That's what I'm trying to figure out - what do you see as the sources of risk, going onto one of the big defi platforms and making an 8% P2P loan?

I see 4 primary risks, in order of most likely:
1. This business fails. The companies attempting to profit off this spread and make a business here simply aren't able to do so. It's a new business, and no one knows if it will work long term. When they fail, they aren't able to give all the assets back to the "depositors". They are trying to mitigate this risk by taking 2x collateral on the loans, auto-liquidation triggers, etc. Hopefully they don't fail, and if they DO - hopefully they fail in a way that gives depositors back their money as opposed to a bankruptcy type situation

2. There is a hack of some sort and the assets are stolen. Always a risk, and one of the reasons crypto and DeFi are SUPPOSED to stay away from big centralized entities. In this case, the business can mitigate their risk in how they choose to store or insure the assets. Using BlockFi as an example (not an endorsement), they have chosen to use a large, regulated entity like Gemini to hold the crypto assets. 95% of the assets are in cold storage (offline, so not vulnerable to cyber hacks), and the remaining 5% is insured by Aon (I have no idea what the details of this insurance are). These security measures cost money of course, and the expenses either eat into profit OR affect the interest rates they are able to offer to depositors / borrowers. They can also choose to have their security measures "certified" by some third party expert group with a name people trust (e.g., Deloitte, the Big 4 accounting/consulting firm). And of course, these mitigation steps could fail

3. The stablecoins don't hold their value. These are new so there's no guarantee they will hold up long term. Some of the issuers (e.g., Coinbase, Gemini) are large institutions who volunteer to go under some sort of audit to see what collateral they hold (which adds costs in an attempt to engender trust). Some don't. At some point, we are simply trusting that the $1 of stablecoin you are lending will be worth $1 when you take it back out of the account. This risk does NOT apply to crypto deposits like Bitcoin - it is WELL known that their value at any given point will be a crapshoot :)

4. You get blown up by user error. For example, if you send the crypto to the wrong address - it's gone. If you send Bitcoin to an Ethereum wallet address by mistake - gone. Transferring money isn't free at every stage - so if you rack up a lot of small transactions, you are basically eating away at your interest. If your timeline is short enough or your activity level too high, you may actually lose out. This is a small risk though - I think my initial Bitcoin transfer was $0.57. I moved a stablecoin for $1.76. That's a flat fee for whatever amount you choose to transfer, so you are rewarded for larger transfers. Given the current interest rates, I only need to hold for a bit over a week to overcome. Withdrawal fees vary per platform, but you usually get at least one free one per month. I think Celsius is unlimited free withdrawals, BlockFi is one
tman9999 wrote: Wed Aug 12, 2020 10:59 am
MBB_Boy wrote: Mon Aug 10, 2020 4:07 pm I used to dabble in P2P lending, and I view this in the same vein. This at least has the advantage of allowing you to withdraw whenever you want, instead of being invested for a 3-5 year term. I have not decided on whether I am interested in pursuing this - it's apples / oranges from my decision to invest crypto assets.
So why did you decide to invest in crypto assets??

I have already made the decision to hold some crypto assets, going on 10 years ago. I am not interested in selling what I already own - given that assumption, it is a pretty easy call to "lend" these out and earn interest on them. The alternative is to have them sitting in my desk earning nothing except (hopefully) appreciation. I am giving up some control in exchange for interest. 4-6% interest on my various assets is enough for me to break them out of my hardware wallet. It may not be enough for others.

This is a separate decision from purchasing new stablecoin and investing it for 8% or whatever. Every time I get paid, I have a choice with what I should do with the money. The decision to buy stablecoin and lend it out means that I DON'T buy VTSAX in my taxable account (or any other Boglehead approved goal). I don't know if I'm there yet. If you KNOW that the money won't simply disappear, it would be illogical not to take the "guaranteed" 8% for as long as it is offered, and then pull the money and put it into the market when the interest rate eventually drops. Would anyone here choose VTSAX in lieu of an 8% interest savings account at Ally? The rub is that you DON'T know, there is a risk, and hence the interest rate. I will probably "diversify" :)
tman9999 wrote: Wed Aug 12, 2020 10:59 am
MBB_Boy wrote: Mon Aug 10, 2020 4:07 pm All this said, I don't view this as being a true "DeFi" application. Also, many things about this run counter to the "true" spirit of crypto - working with a centralized, regulated entitity that requires proof of identity (e.g., SSN and driver's license, just like a bank) and then turning over your crypto assets directly (not your keys, not your assets!) is basically violating the first two rules of crypto. HOWEVER, there's still a money making opportunity here, and one that falls within my risk tolerance (again, comparable to P2P in a lot of ways).
Which "this" are you referring to, that isn't a true "DeFi" application? And how, then, would you define a true defi application?

The point of "Decentralized Finance" is to be......decentralized. Building large, centralized, regulated organizations is basically rebuilding the current system. Maybe its more efficient in some ways, or offers new features or whatever - but eventually we end up in a similar place.
tman9999 wrote: Wed Aug 12, 2020 10:59 am
MBB_Boy wrote: Mon Aug 10, 2020 4:07 pm And of course, when the interest rates presumably drop as enough interest builds that they can lower their cost of capital, I will re-assess. Part of the reason the interest rate is so high is that many people are skeptical. After it normalizes (and assuming nothing blows up), that will change and the rate of return will change accordingly. As it should.
Let's say the cost of capital drops along with interest rates. What about that would cause you to reassess?
I don't have a hard number for what the interest rate has to be for me to pull out, especially for the crypto. Some interest is obviously better than nothing, so you could argue you should always leave it. Presumably the cost of capital and interest drop due to widespread adoption and acceptance, which I would view as a sign that the amount of risk is lower, so I SHOULD accept a lower rate.

The stablecoin is easier - back to my earlier assertion that I would be forgoing market investments in favor of doing this, I would probably reassess at something like 5%.
barnaclebob
Posts: 4214
Joined: Thu Aug 09, 2012 10:54 am

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by barnaclebob »

tman9999 wrote: Wed Aug 12, 2020 10:48 am
barnaclebob wrote: Tue Aug 11, 2020 8:37 am
kbjeffrey wrote: Fri Aug 07, 2020 5:09 pm I've put some money into AnchorUSD. They say they offer "upto 8%" in interest on the first $5,000 you invest. It looked reasonably reliable to me:

- https://www.anchorusd.com/
- https://www.investopedia.com/news/ibm-l ... red-banks/.

I figure that in the very worst case, I'll loose 5k. In the best case, I'll actually earn some interest on my cash. Right now I'm getting 7.88%
See this is the problems with these types of schemes. You get 8% returns on 5k. Big deal, thats a nice dinner. Nobody is going to get rich or build a retirement off that. But, somebody will lose nearly everything they have deposited when the jack and the box goes off. If you don't think this scheme will last nearly a decade before something gives then you are just playing hot potato.
While I don't know that I'd refer to getting involved in crypto currency holding and trading as a "scheme", I certainly take your point. Even with all the safeguards previously mentioned in this thread, the lack of FDIC or other federally-backed insurance on accounts means that if anything goes wrong, you're screwed. And therefore a smart investor would be conservative about putting a significant portion of their portfolio into this vehicle. At that point, you do have to ask yourself, "what's the point?" (OTOH, who wouldn't move their entire portfolio into a sure 8% yield with 0 risk??).

I guess optimistic me figures it like this:
1. yes, it's early days, and much needs to be worked out.
2. but rather than wait for everything to be perfect, get involved now in a small way in order to learn how it works, and already be set up and ready to as/when things become more assured.
3. then, when things have sorted themselves out and crypto has been integrated into the existing banking system, a) I'll know about it because I've been following it; and b) I'll be ready to take full advantage of whatever the latest offerings are at that time.
Crypto mining and trading isnt a scheme but i was referring to this description:

"I recommend researching the term "yield farming". There are a number of platforms that are giving away tokens (that can be sold for cash) in return for depositing funds with their smart contracts. These returns can be as high as 40% if done correctly (which I realize sounds insane, and hence you should be highly skeptical). There's a risk of loss due to smart contract bugs + a market risk, but I've personally decided the upside is worth the potential downside (with a small portion of my total funds)."

Anything that is described as "smart contracts" smells pretty fishy to me.
EnjoyIt
Posts: 4681
Joined: Sun Dec 29, 2013 8:06 pm

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by EnjoyIt »

tman9999 wrote: Sat Aug 08, 2020 10:49 am Well it’s certainly an interesting topic to me; and this thread has produced a few new aspects of it to consider and investigate. The naysaying isn’t particularly helpful - the “if it’s too good to be true” comments don’t add anything. The most striking thing to me about the comments here is that it looks like only one commenter has any real direct experience in putting their money into some type of digital asset.

Then again, I guess that isn’t surprising. To the 3-fund/4-fund b’heads I imagine crypto yield farming makes individual stock picking look like a solid long-term strategy to wealth building.

I have $100 placements in two different stablecoins and a couple of different wallets. I want to believe! And I’m as skeptical as anyone else about how legit this stuff really is. I’m going to continue to investigate it. Happy to post up any new learnings, observations, insights - good or bad.
The too good to be true comment I think is far more helpful than you realize. You have to understand that in todays low yield environment, that 8% has to come from somewhere, and that somewhere has to have risk to be able to afford an 8% return to its investors. Until you can pinpoint the risk, you are investing in "I want to believe." which in my opinion is not a sound inviting strategy, but perfectly fine if you want to have some fun and gamble a little.

Frankly, if I want to gamble, I play poker as my expected return is far higher.

Whenever looking to invest, it is worthwhile to invest a decent enough percentage of one's portfolio so as to make the process worthwhile. If one has $100k invested in a 70/30 portfolio and they choose to take $200 from bonds and invest it in a stablecoin, theoretically they are increasing their returns from 1% to 8% on only .2% of their portfolio which will end up being no more than a rounding error at the end of the year. Most say, unless you are willing to put at least 5% of your portfolio into a particular asset class (if this is even an asset class) then don't even bother. Me, I'm not gong to bother as I am not interested in taking the risk on 5% of my wealth on something I do not 100% understand.
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
qwerty123
Posts: 35
Joined: Thu Jun 26, 2014 7:44 pm

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by qwerty123 »

barnaclebob wrote: Thu Aug 13, 2020 1:38 pm Crypto mining and trading isnt a scheme but i was referring to this description:

"I recommend researching the term "yield farming". There are a number of platforms that are giving away tokens (that can be sold for cash) in return for depositing funds with their smart contracts. These returns can be as high as 40% if done correctly (which I realize sounds insane, and hence you should be highly skeptical). There's a risk of loss due to smart contract bugs + a market risk, but I've personally decided the upside is worth the potential downside (with a small portion of my total funds)."

Anything that is described as "smart contracts" smells pretty fishy to me.
Can you elaborate on what about the term smart contracts feels fishy to you? Is it that you don't understand what they are, or have you had negative experiences with them in the past?

One of the benefits of a smart contract vs parking funds in something like BlockFi is that you can read exactly how the system works / all of the rules, and every trade happens out in the open. You can see how much collateral exists, you can see how much is lent out, and you can decide for yourself how much risk exists.
400401402
Posts: 14
Joined: Sun May 31, 2020 6:46 pm

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by 400401402 »

Few things to consider:
1. Credit risk. There is a reason why people are ready to lend crypto assets at interest >5%, while people are queing to lend money to the US Treasury at <1% and to a bank at little over 1%. Crypto assets are using the money lent to finance speculative strategies such as short selling. So one needs to be willing to take such a huge credit/counterparty risk. Some one else pointed out that its not worthwhile having allocation to an asset class if the allocation is less than 5%. I am not okay with such high credit risk for 5% of my portfolio. Some one else may be. I am okay with having 1% or less of my portfolio allocated to such high credit risk class, but returns on 1% are not worth anyone's time (as a percentage of portfolio)

2. Taxes. Lot of effort involved in crypto taxes. Remember even if one sells one crypto asset for another, its a capital gains event (it need not be sold for USD). It could be USDC exchanged for USDT (both pegged to USD), but this is a capital gains taxable event. Then the interest itself is taxed as income. Is it worth one's time to spend all this extra effort ? It's one's choice.

3. Macro strategy wise, this is no different from buying a certificate of deposit in a currency pegged to USD. Lot of countries around the world peg their currency to USD (simple google search). If one looks at prevailing CD rates in those countries, some offer as little as 3% (still higher than USD) and some offer as high as 11% . Ofcourse, there is a reason why 11% is the prevailing rate (goes to the first point above - credit risk). Coming back to crypto, the stable coins are only as stable as the stable coin issuer backing up the coin they issue with equivalent USD in safe custody - at this point this audit mechanism is weak
CycloRista
Posts: 174
Joined: Sun Feb 16, 2020 11:53 am

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by CycloRista »

I cashed out for the 4th time recently on BTC and LiteCoin.

I'll jump back in when prices come below the stratosphere again...
lgb
Posts: 94
Joined: Fri Mar 01, 2019 9:46 am

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by lgb »

tman9999 wrote: Sat Aug 08, 2020 10:49 am Well it’s certainly an interesting topic to me; and this thread has produced a few new aspects of it to consider and investigate. The naysaying isn’t particularly helpful -
the “if it’s too good to be true” comments don’t add anything.
The most striking thing to me about the comments here is that it looks like only one commenter has any real direct experience in putting their money into some type of digital asset.

Then again, I guess that isn’t surprising. To the 3-fund/4-fund b’heads I imagine crypto yield farming makes individual stock picking look like a solid long-term strategy to wealth building.

I have $100 placements in two different stablecoins and a couple of different wallets. I want to believe! And I’m as skeptical as anyone else about how legit this stuff really is. I’m going to continue to investigate it. Happy to post up any new learnings, observations, insights - good or bad.
Actually - that part of all the comments is the one likely founded in drawing from long term actual experiences - from those that have gone before you... :oops: - but my guess is you're not actually ready to 'hear' any of that for the most part - since you're excited about the speculative nature of what you're considering/doing. Which is fine to be speculative if it can fit in your current lifestyle. You could also draw a conclusion that since it is speculative, not nearly as many people on this forum are participating in it, which is why you mentioned that as one of the things you noticed occurring - not that many actual real people commenting on any real direct experience. I also don't have experience - but I, like you - find it fascinating. (from a speculative standpoint) :happy - Some people still play carnival games and find it exciting/fun, even when they know the outcome is for the most part predetermined mostly. :sharebeer
Topic Author
tman9999
Posts: 71
Joined: Tue May 20, 2008 1:06 pm

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by tman9999 »

lgb wrote: Thu Aug 13, 2020 8:31 pm Actually - that part of all the comments is the one likely founded in drawing from long term actual experiences - from those that have gone before you... :oops: - but my guess is you're not actually ready to 'hear' any of that for the most part - since you're excited about the speculative nature of what you're considering/doing. Which is fine to be speculative if it can fit in your current lifestyle. You could also draw a conclusion that since it is speculative, not nearly as many people on this forum are participating in it, which is why you mentioned that as one of the things you noticed occurring - not that many actual real people commenting on any real direct experience. I also don't have experience - but I, like you - find it fascinating. (from a speculative standpoint) :happy - Some people still play carnival games and find it exciting/fun, even when they know the outcome is for the most part predetermined mostly. :sharebeer
Not speculative. Not interested in speculating. Very aware of TGTBT nostrums. Seeing some great input in some of the later comments in this thread. I expect this will not be the last thread on this topic in this forum. Maybe a bit early, that’s all.
EnjoyIt
Posts: 4681
Joined: Sun Dec 29, 2013 8:06 pm

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by EnjoyIt »

Something I find very interesting regarding cryptos is how evalangetical many of its holders become. It makes sense though. It is in the best interest to spread the word and get more people interested. Without increasing demand, price does not go up.
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
Topic Author
tman9999
Posts: 71
Joined: Tue May 20, 2008 1:06 pm

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by tman9999 »

EnjoyIt wrote: Sat Aug 15, 2020 11:31 am Something I find very interesting regarding cryptos is how evalangetical many of its holders become. It makes sense though. It is in the best interest to spread the word and get more people interested. Without increasing demand, price does not go up.
Look up yield farming. Interest on savings is another way to get return without taking on as much risk.
EnjoyIt
Posts: 4681
Joined: Sun Dec 29, 2013 8:06 pm

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by EnjoyIt »

tman9999 wrote: Sat Aug 15, 2020 12:02 pm
EnjoyIt wrote: Sat Aug 15, 2020 11:31 am Something I find very interesting regarding cryptos is how evalangetical many of its holders become. It makes sense though. It is in the best interest to spread the word and get more people interested. Without increasing demand, price does not go up.
Look up yield farming. Interest on savings is another way to get return without taking on as much risk.
I asked you before, why is the interest rate so high compared to other forms of investments out there? It is because you are taking in more risk. There is nothing wrong with taking on more risk to reap higher rewards but one should understand what that risk really is.

Your statement “without taking on as much risk,” gives me pause that maybe you are unaware of where that risk really is. I may be wrong, but reading your comments thus far has not proven me mistaken.

Realize there is no such thing as a free lunch. Higher returns always come with more risk.
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
Anon9001
Posts: 682
Joined: Fri Dec 20, 2019 9:28 am
Location: भारत

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by Anon9001 »

There is a huge black-swan risk with these things which requires you to put tiny allocations of 5-10% but then the question is why even do this? 8% of 10% is 0.8% which is a very tiny gain for your over-haul portfolio. Much better to put the 5-10% into Bitcoin due to it's high volatility even this tiny amount can give huge gains (and huge losses) on the invested amount.
Topic Author
tman9999
Posts: 71
Joined: Tue May 20, 2008 1:06 pm

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by tman9999 »

EnjoyIt wrote: Sat Aug 15, 2020 1:36 pm
I asked you before, why is the interest rate so high compared to other forms of investments out there? It is because you are taking in more risk. There is nothing wrong with taking on more risk to reap higher rewards but one should understand what that risk really is.

Your statement “without taking on as much risk,” gives me pause that maybe you are unaware of where that risk really is. I may be wrong, but reading your comments thus far has not proven me mistaken.

Realize there is no such thing as a free lunch. Higher returns always come with more risk.
Oh really?? By that logic I guess I should build my three-fund portfolio around funds like State Farm's S&P500 Index fund (SNPBX) with its 1.34%ER, rather than using Black Rock's ITOT at 0.03% because, you know, the less expensive one must be a scam or a lot riskier.

Remember when online savings accounts were new a few years ago, and you could get 2500% more interest on your savings than your traditional bank? Different model. Not a scam. (0.1% vs. 2.5%). Crypto currency and digital assets are evolving into what could become different business model for banking - and a highly disruptive one.

Not sure if digital currencies are similar that way or not, but I'm open to the possibility. Not planning to put my emergency savings into an account. Not planning on putting a measurable percentage of my portfolio into one either. Just trying to get smarter about it, so that when/if it settles into something stable and secure, I'm not dragging my feet for three years and missing out on some good returns.

Keeping an open mind is what got us to embracing ETFs and the three fund portfolio, remember?? :sharebeer
EnjoyIt
Posts: 4681
Joined: Sun Dec 29, 2013 8:06 pm

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by EnjoyIt »

tman9999 wrote: Sat Aug 15, 2020 2:31 pm
EnjoyIt wrote: Sat Aug 15, 2020 1:36 pm
I asked you before, why is the interest rate so high compared to other forms of investments out there? It is because you are taking in more risk. There is nothing wrong with taking on more risk to reap higher rewards but one should understand what that risk really is.

Your statement “without taking on as much risk,” gives me pause that maybe you are unaware of where that risk really is. I may be wrong, but reading your comments thus far has not proven me mistaken.

Realize there is no such thing as a free lunch. Higher returns always come with more risk.
Oh really?? By that logic I guess I should build my three-fund portfolio around funds like State Farm's S&P500 Index fund (SNPBX) with its 1.34%ER, rather than using Black Rock's ITOT at 0.03% because, you know, the less expensive one must be a scam or a lot riskier.

Remember when online savings accounts were new a few years ago, and you could get 2500% more interest on your savings than your traditional bank? Different model. Not a scam. (0.1% vs. 2.5%). Crypto currency and digital assets are evolving into what could become different business model for banking - and a highly disruptive one.

Not sure if digital currencies are similar that way or not, but I'm open to the possibility. Not planning to put my emergency savings into an account. Not planning on putting a measurable percentage of my portfolio into one either. Just trying to get smarter about it, so that when/if it settles into something stable and secure, I'm not dragging my feet for three years and missing out on some good returns.

Keeping an open mind is what got us to embracing ETFs and the three fund portfolio, remember?? :sharebeer
Clearly you understand how higher returns come from decreased fees on funds. You also understand that online savings accounts have lower expenses than brick and mortar. You are still not sure where the higher returns are coming from crypto exchanges?
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
Topic Author
tman9999
Posts: 71
Joined: Tue May 20, 2008 1:06 pm

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by tman9999 »

EnjoyIt wrote: Sat Aug 15, 2020 2:58 pm
Clearly you understand how higher returns come from decreased fees on funds. You also understand that online savings accounts have lower expenses than brick and mortar. You are still not sure where the higher returns are coming from crypto exchanges?
Lower operating expenses than traditional banks or even online banking. Lower transaction costs for moving money around, cross border transactions, etc. At least, that's the premise. Is it real? Is there really something there, or is it all smoke and mirrors? I don't know. Not betting either way, just trying to be ready in case it turns out to be real. Finding out who know what here seemed like a solid way to research it to me.
EnjoyIt
Posts: 4681
Joined: Sun Dec 29, 2013 8:06 pm

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by EnjoyIt »

tman9999 wrote: Sat Aug 15, 2020 3:05 pm
EnjoyIt wrote: Sat Aug 15, 2020 2:58 pm
Clearly you understand how higher returns come from decreased fees on funds. You also understand that online savings accounts have lower expenses than brick and mortar. You are still not sure where the higher returns are coming from crypto exchanges?
Lower operating expenses than traditional banks or even online banking. Lower transaction costs for moving money around, cross border transactions, etc. At least, that's the premise. Is it real? Is there really something there, or is it all smoke and mirrors? I don't know. Not betting either way, just trying to be ready in case it turns out to be real. Finding out who know what here seemed like a solid way to research it to me.
That's a great question, how to research what goes on behind the scenes of this investment vehicle? I honestly don't know as there is significant hearsay and without any real fact behind it. That worries me with regards to it being a safe investment.

I realize a few things. Interest rates are low which means they will take your money and invest it outside of safe vehicles. Even currency exchanges don't have such high margins. remember, if they are giving out 8%, that means they need to make more than 8% minus expenses to make it worthwhile. I suspect something on the order of 10% or more is necessary. But what do I know.
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
qwerty123
Posts: 35
Joined: Thu Jun 26, 2014 7:44 pm

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by qwerty123 »

EnjoyIt wrote: Sat Aug 15, 2020 1:36 pm
tman9999 wrote: Sat Aug 15, 2020 12:02 pm
EnjoyIt wrote: Sat Aug 15, 2020 11:31 am Something I find very interesting regarding cryptos is how evalangetical many of its holders become. It makes sense though. It is in the best interest to spread the word and get more people interested. Without increasing demand, price does not go up.
Look up yield farming. Interest on savings is another way to get return without taking on as much risk.
I asked you before, why is the interest rate so high compared to other forms of investments out there? It is because you are taking in more risk. There is nothing wrong with taking on more risk to reap higher rewards but one should understand what that risk really is.

Your statement “without taking on as much risk,” gives me pause that maybe you are unaware of where that risk really is. I may be wrong, but reading your comments thus far has not proven me mistaken.

Realize there is no such thing as a free lunch. Higher returns always come with more risk.
This is a really great point, and I agree that it's important to take the risk into account. Once thing I've found helpful is to calculate expected return (expected value at end of investment * (1 - probability of total loss)). Since there's a risk of losing everything, the expected return needs to be quite high to appropriately compensate you. In addition, this should be limited to a small portion of your total assets since there is a non-zero risk of total loss.
cjg
Posts: 72
Joined: Sat Jan 11, 2014 9:03 pm

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by cjg »

tman9999 wrote: Sun Aug 09, 2020 9:45 pm
typical.investor wrote: Sun Aug 09, 2020 9:16 pm
Claims that very risky loans are "guaranteed" and "can't default" to me is purely disinformation. You are just repeating the claims by industry insiders that really are designed to funnel more money into crypto without consideration for actual risk.
I didn’t say “guaranteed”. I said 100%+ collateralized with an auto-liquidate trigger. I don’t know enough about how that works in practice, but that’s my understanding of how it’s set up.

Do you have any knowledge about how such a trigger could fail, leaving the lender holding the bag? I don’t- big part of why I’m asking.
MakerDAO good example of this. Collateral dropped in price and got auctioned. Due to network congestion, only one bid for the collateral made it through allowing someone to buy $8 million worth of collateral for $0 since that was the only bid. Maybe someday these markets will make sense to join but it isn't safe to invest in today and might not ever be.

https://insights.glassnode.com/what-rea ... -makerdao/
User avatar
abuss368
Posts: 21537
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by abuss368 »

Would not touch it. Don’t know much about it and don’t want to take the risk.
John C. Bogle: “Simplicity is the master key to financial success."
typical.investor
Posts: 2289
Joined: Mon Jun 11, 2018 3:17 am

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by typical.investor »

cjg wrote: Sat Aug 15, 2020 6:33 pm
tman9999 wrote: Sun Aug 09, 2020 9:45 pm
typical.investor wrote: Sun Aug 09, 2020 9:16 pm
Claims that very risky loans are "guaranteed" and "can't default" to me is purely disinformation. You are just repeating the claims by industry insiders that really are designed to funnel more money into crypto without consideration for actual risk.
I didn’t say “guaranteed”. I said 100%+ collateralized with an auto-liquidate trigger. I don’t know enough about how that works in practice, but that’s my understanding of how it’s set up.

Do you have any knowledge about how such a trigger could fail, leaving the lender holding the bag? I don’t- big part of why I’m asking.
MakerDAO good example of this. Collateral dropped in price and got auctioned. Due to network congestion, only one bid for the collateral made it through allowing someone to buy $8 million worth of collateral for $0 since that was the only bid. Maybe someday these markets will make sense to join but it isn't safe to invest in today and might not ever be.

https://insights.glassnode.com/what-rea ... -makerdao/
Wow, what chaos.

Yesterday’s promising headline was ... Crypto backed by crypto: Dai seeks to change 'stablecoin' game.

Anyway, it interesting that network congestion caused such havoc. That’s a very good read I think.
EnjoyIt
Posts: 4681
Joined: Sun Dec 29, 2013 8:06 pm

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by EnjoyIt »

typical.investor wrote: Sun Aug 16, 2020 2:25 am
cjg wrote: Sat Aug 15, 2020 6:33 pm
tman9999 wrote: Sun Aug 09, 2020 9:45 pm
typical.investor wrote: Sun Aug 09, 2020 9:16 pm
Claims that very risky loans are "guaranteed" and "can't default" to me is purely disinformation. You are just repeating the claims by industry insiders that really are designed to funnel more money into crypto without consideration for actual risk.
I didn’t say “guaranteed”. I said 100%+ collateralized with an auto-liquidate trigger. I don’t know enough about how that works in practice, but that’s my understanding of how it’s set up.

Do you have any knowledge about how such a trigger could fail, leaving the lender holding the bag? I don’t- big part of why I’m asking.
MakerDAO good example of this. Collateral dropped in price and got auctioned. Due to network congestion, only one bid for the collateral made it through allowing someone to buy $8 million worth of collateral for $0 since that was the only bid. Maybe someday these markets will make sense to join but it isn't safe to invest in today and might not ever be.

https://insights.glassnode.com/what-rea ... -makerdao/
Wow, what chaos.

Yesterday’s promising headline was ... Crypto backed by crypto: Dai seeks to change 'stablecoin' game.

Anyway, it interesting that network congestion caused such havoc. That’s a very good read I think.
I constantly read about issues with crypto. It feels like once every year or two we get a story about another way someone has taken and vantage of the system.

I simply don’t have faith that my money is secure in this world. Very high risk.
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
Topic Author
tman9999
Posts: 71
Joined: Tue May 20, 2008 1:06 pm

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by tman9999 »

cjg wrote: Sat Aug 15, 2020 6:33 pm
tman9999 wrote: Sun Aug 09, 2020 9:45 pm
typical.investor wrote: Sun Aug 09, 2020 9:16 pm
Claims that very risky loans are "guaranteed" and "can't default" to me is purely disinformation. You are just repeating the claims by industry insiders that really are designed to funnel more money into crypto without consideration for actual risk.
I didn’t say “guaranteed”. I said 100%+ collateralized with an auto-liquidate trigger. I don’t know enough about how that works in practice, but that’s my understanding of how it’s set up.

Do you have any knowledge about how such a trigger could fail, leaving the lender holding the bag? I don’t- big part of why I’m asking.
MakerDAO good example of this. Collateral dropped in price and got auctioned. Due to network congestion, only one bid for the collateral made it through allowing someone to buy $8 million worth of collateral for $0 since that was the only bid. Maybe someday these markets will make sense to join but it isn't safe to invest in today and might not ever be.

https://insights.glassnode.com/what-rea ... -makerdao/
Yikes! Great story, and a great example of "I don't know what I don't know." Ergo the reason I posted up. It all looks good on paper - until doo doo hits the fan. And it looks like there are bots ready to pounce as soon as an unexpected glitch shows up. Thanks for sharing this. Very helpful.
softwaregeek
Posts: 564
Joined: Wed May 08, 2019 8:59 pm

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by softwaregeek »

hillstonekr wrote: Sun Aug 09, 2020 1:34 am yup have some funds in blockfi.com for 8.6% APY. done my research and been around the crypto industry since 2015. seen a lot of scams and hacks.

blockfi is very credible in the industry and has a lot of well known backers: fidelity, peter thiel, winklevoss twins, and several other names in crypto that have a good reputation.

the industry is new so i see a lot of distrust here on the boglehead forums. totally understandable. would not put all my money in there but with a guaranteed rate of 8.6%, i'm more than happy putting a portion in.
Also in the industry and it scares me.
Patzer
Posts: 302
Joined: Wed Jun 10, 2015 10:56 am

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by Patzer »

AT&T 6.93% Dividend Yield, 35 year history of increasing it's dividend...
OR
Some website that tells you it will give your money back and promises 4.5-8.6% yield, based on an unproven collateral scheme in a currency environment known to have flash crashes.

Hmm, tough choice.
ccf
Posts: 169
Joined: Mon Mar 09, 2015 9:13 pm

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by ccf »

For those folks who are already long term speculating on Bitcoin, BlockFi is offering (through Oct 31) up to $275 bonus for new accounts: https://try.blockfi.com/oct-btc-offer/

Interest rates are here: https://blockfi.com/rates/

So if you have 1 BTC, storing it with BlockFi will get you a $275 bonus + 6% interest (at the moment)
EnjoyIt
Posts: 4681
Joined: Sun Dec 29, 2013 8:06 pm

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by EnjoyIt »

So let me understand this. I put money in BlockFi via a cryptocurrency. They loan that money out and I get a percentage of it. Considering they are giving 8.6% that would mean they must be making more than that. Considering the current interest rate environment they must be loaning money at a very high rate to provide such returns. That also means that their borrows are of much higher risk.

There is no such thing as a free lunch making me very skeptical about this product.
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
ccf
Posts: 169
Joined: Mon Mar 09, 2015 9:13 pm

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by ccf »

This is a weird space. Crypto secured crypto loans can have terms in days or hours and although their retail loan business is right there in the link, I expect institutional is the vast majority of their volume.

No free lunches, but when it comes to risk but I'm already holding Bitcoin. Keeping my BTC with BlockFi instead of CoinBase doesn't move the risk needle much.

I would definitely not ever ever consider converting my USD to a stablecoin to get that 8.6% but earning 6% on the bitcoin that I already have works for me.
EnjoyIt
Posts: 4681
Joined: Sun Dec 29, 2013 8:06 pm

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by EnjoyIt »

ccf wrote: Sat Oct 17, 2020 3:18 pm This is a weird space. Crypto secured crypto loans can have terms in days or hours and although their retail loan business is right there in the link, I expect institutional is the vast majority of their volume.

No free lunches, but when it comes to risk but I'm already holding Bitcoin. Keeping my BTC with BlockFi instead of CoinBase doesn't move the risk needle much.

I would definitely not ever ever consider converting my USD to a stablecoin to get that 8.6% but earning 6% on the bitcoin that I already have works for me.
So what’s the risk you are taking keeping it in blockfi that warrants the 6% interest?

Again no free lunch which you claim to agree with.
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
ccf
Posts: 169
Joined: Mon Mar 09, 2015 9:13 pm

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by ccf »

Mainly counterparty risk, as you pointed out. https://help.blockfi.com/hc/en-us/artic ... t-BlockFi-

More insight into who these counterparties are: "The Market Driving Crypto Lending"
https://blockfi.com/the-market-driving-crypto-lending

Would I risk USD by exchanging for it stablecoins and depositing with BlockFi (as the OP mentioned)? I would not.
But I am okay with this level of risk when it comes to my existing magic beans.
softwaregeek
Posts: 564
Joined: Wed May 08, 2019 8:59 pm

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by softwaregeek »

I see it as more of an exchange risk.

Biggest exchange in Canada was exit scam. QuadrigaCX.

Second biggest exchange in China has now frozen withdrawal as of yesterday. That's OKEX.

BitMEX leaders hauled off in handcuffs.

It ain't government bonds.
Topic Author
tman9999
Posts: 71
Joined: Tue May 20, 2008 1:06 pm

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by tman9999 »

For those who are skeptical about whether digital currency and crypto are here for the long haul, just read that Fed Reserve Chairman Jerome Powell will be speaking at the IMF on digital currency today. https://www.reuters.com/article/us-usa- ... SKBN2702YL

Interesting data point.
EnjoyIt
Posts: 4681
Joined: Sun Dec 29, 2013 8:06 pm

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by EnjoyIt »

tman9999 wrote: Mon Oct 19, 2020 9:45 am For those who are skeptical about whether digital currency and crypto are here for the long haul, just read that Fed Reserve Chairman Jerome Powell will be speaking at the IMF on digital currency today. https://www.reuters.com/article/us-usa- ... SKBN2702YL

Interesting data point.
Thanks for the update. I'm curious what he thinks. I wonder if I can find a link to a livestream.
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
Topic Author
tman9999
Posts: 71
Joined: Tue May 20, 2008 1:06 pm

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by tman9999 »

EnjoyIt wrote: Mon Oct 19, 2020 9:54 am
tman9999 wrote: Mon Oct 19, 2020 9:45 am For those who are skeptical about whether digital currency and crypto are here for the long haul, just read that Fed Reserve Chairman Jerome Powell will be speaking at the IMF on digital currency today. https://www.reuters.com/article/us-usa- ... SKBN2702YL

Interesting data point.
Thanks for the update. I'm curious what he thinks. I wonder if I can find a link to a livestream.
You can read a summary of his comments here: https://www.theblockcrypto.com/post/816 ... provements

Tl;dr: A CBDC would be a good thing, as it would facilitate faster, less costly payments internally and cross-border; and it would give more access to people who currently don’t have access to banking. The US and 80% of the rest of the world is currently evaluating CBDCs. We have no need to be first, we’d rather take our time and do it right. There is a study underway now between FRB Boston and MIT on a hypothetical CBDC.
EnjoyIt
Posts: 4681
Joined: Sun Dec 29, 2013 8:06 pm

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by EnjoyIt »

tman9999 wrote: Tue Oct 20, 2020 10:33 am
EnjoyIt wrote: Mon Oct 19, 2020 9:54 am
tman9999 wrote: Mon Oct 19, 2020 9:45 am For those who are skeptical about whether digital currency and crypto are here for the long haul, just read that Fed Reserve Chairman Jerome Powell will be speaking at the IMF on digital currency today. https://www.reuters.com/article/us-usa- ... SKBN2702YL

Interesting data point.
Thanks for the update. I'm curious what he thinks. I wonder if I can find a link to a livestream.
You can read a summary of his comments here: https://www.theblockcrypto.com/post/816 ... provements

Tl;dr: A CBDC would be a good thing, as it would facilitate faster, less costly payments internally and cross-border; and it would give more access to people who currently don’t have access to banking. The US and 80% of the rest of the world is currently evaluating CBDCs. We have no need to be first, we’d rather take our time and do it right. There is a study underway now between FRB Boston and MIT on a hypothetical CBDC.
Interesting. It would basically eliminate the need for bitcoin and the like. Except for maybe speculation and illegal activity.
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
Topic Author
tman9999
Posts: 71
Joined: Tue May 20, 2008 1:06 pm

Re: Anyone using crypto exchanges to earn higher interest on their cash?

Post by tman9999 »

EnjoyIt wrote: Tue Oct 20, 2020 1:27 pm
Interesting. It would basically eliminate the need for bitcoin and the like. Except for maybe speculation and illegal activity.
Not really. By "bitcoin and the like" I assume you mean the various digital tokens and coins that being traded around on crypto exchanges. Some are known as "stable coins" - USDC and USDT are two of the most popular. And then there are thousands of other tokens and coins out there (some of which are technically known as sh*t coins - really. https://www.investopedia.com/terms/s/shitcoin.asp).

Even though a lot of these are governance tokens, that hasn't stopped speculators from making a market in them and driving up their values. There are also lots of reasons for issuing tokens, which go beyond what a normal financial transaction would require. For all these reasons, there are will likely always be a bunch of tokens and coins that are not stable coins or CBDC. More here: https://news.bitcoin.com/altcoins-why-over-5000/
Post Reply