Is Crypto lending, currently, a poor investment decision?

MrMuppet said:
look, dude. I already told you many times you need to get into the rabbit hole and do your due diligence on these companies and on the entire ecosystem.

You cannot come up to an internet forum were one half of members doesn't know the difference between ETH and BTC and the other half condemns crypto as the source of all evil and ask for investment advice...or expect somebody to throw free lunch at you.

You are on your own here. There is no government body to hold your hand, no rating agency to do your work and nobody you can sue in case you lose your money due to a stupid investment decision.

By the way I'm also not quite sure if you really know how to calculate expected value...if you get 10% yield p.a. how high must the probability of default be to make it a break even bet?

Take all the defaulted lending facilities and divide that number by all lending facilities that exist to get a rough estimate of your default risk and compare that to your break even default probability.
I'm pretty sure you haven't done that, right?

Just like you didn't research all the hacks and the fraud and the bankruptcies to learn what really happened. You've read a press release or perhaps a blog post or news article, but you don't know...and that makes you uncomfortable.

You want that juicy yield, don't you? But you want the predictability and the safety of treasury bonds...and that's what you don't get. Now you come up here with doubtful questions and ask for someone to wash your sorrows away...and that's what you also won't get.

Do your homework and make a decision.
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I dont know where you get 10% per year staking BTC. You must be referring to the futures arb, which is more like a job than anything else. BlockFi and the other sites I have seem dont pay anywhere near that. And its hard to do any work (due diligence) when there is not much data to go by, no financials, its pure wild west capitalism. Hence my opinion that this yield chasing doesn make any sense.
 
I'm not looking for hand holding, I'm looking for someone to throw at me some really strong arguments for staking BTC/ETH. Even though there are too many clueless posters on ET, sometimes there are good posters. I learned somethings on this forum from @Specterx debating me recently. Its also good for me to post because it clarifies my own thinking, makes me try to see all sides of the coin.

For staking I just dont see the math working out
 
Daal said:
If I have $100,000 sitting on the bank earning 0% and the Fed is targeting 2% inflation, I'm losing 2% a year. Then I decide to lend to ABC company at 5%. I'm risking IT ALL (If ABC goes bk) in order to protect my asset from the Fed. That is a defensible decision

But if I have $100,000 worth of BTC that is already protected against money printing and I'm expecting if to go up 5x and THEN I use it to lend to a company like BlockFI, that is just lunacy. I'm risking it all PLUS the 5x appreciation in order to make a few bucks. That's just crazy
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Imo, bitcoin holdings for long term (hodl) is the "safest" way to invest in the crypto space.

Local wallets on a clean Linux machine to hold your private keys. Plan your backups for different scenarios - offsite in case of fire, death for estate planning, authorities breaking down your door and seizing everything (asset forfeiture) everything should be in default "closed" and encrypted with non-backdoored methods (forget Windoze). Some early bitcoin og's have paved the lessons learned on these.

Crypto lending business is very safe, imho. My biggest holding is Celsius Network (which had become an irresponsible portion of my crypto pfolio so I diversified 1/3 of the position to other cryptos, but a lot of it went to a competitor, Nexo). The top players (BlockFi, Celsius, Nexo) use Bitgo which is very secure and insured.

These guys issue over collateralized loans to Institutions (Securities Lending, Prime Brokerage) and to individuals (at minimum 50% LTV). If bitcoin goes down 50% overnight, the borrowers get liquidated before it gets there and there's plenty of liquidity on bitcoin. BlockFi had some liquidations during the March meltdown, but Celsius, did not have a single liquidation (allegedly), the borrowers provided additional collateral quickly. It is my understanding that Celsius is bigger than BlockFi on the crypto Institutional Lending business.

Not financial advice, but personally, if I were to go into "cash" for a portion of the pfolio (I would never go full fiat) for longer than 3 months, I'd park it in stablecoins and deposit most to Celsius and some to BlockFi and Nexo. On stablecoins yields are pretty juicy and worth the risk, imho. Heck, they even have yields on PAX Gold, lower APY but good option if want to diversify some to gold.


https://www.paxos.com/paxgold/
 
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I'm skeptical of these companies. Celsius has what they call their "audit" and its a one page PDF written probably by themselves. It doesnt even include the addreses of where they are holding their crypto. In any event, these companies will be fine 95%+ of the time. Its every once and a while that's the problem. Its just like when banks lend or when corporate bond investors invest. They make money over and over again and then one day there is a problem. But in their case its different because they are swapping CASH (or bank reserves) for a loan that pays interest. They go from 0% upside to a few percent in interest in upside.

A crypto investor is not investing cash, he is investing coins that he is massively bullish, its a different equation. And these companies are all short upside calls on the volatility of crypto. If stocks can take the VIX to 90 (so 9x from calm times), I'd say that crypto can do the same, or worse.

When people think 'these companies are safe' its a statement that might reflect reality now but it also changes that reality (reflexivity) because then they have more clients/loans, pay less in interest and are even more exposed to a big jump in volatility of crypto (short upside calls on volatility), they are not regulated and dont have capital requirements that I'm aware. In the mean time you risk a huge upside to pick up nickels. It just doesn't add up
 
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Could you once and for all explain what you mean by "these companies" ???
Are you referring to exchanges, lenders, token projects, OTC market makers...

You just throw a punch of words around but you don't seem to have any clue of what you are talking about.

In addition, do you really believe any bigger player runs an unhedged book and is exposed to 100% volatility. Come on...
 
Daal said:
I'm skeptical of these companies. Celsius has what they call their "audit" and its a one page PDF written probably by themselves. It doesnt even include the addreses of where they are holding their crypto. In any event, these companies will be fine 95%+ of the time. Its every once and a while that's the problem. Its just like when banks lend or when corporate bond investors invest. They make money over and over again and then one day there is a problem. But in their case its different because they are swapping CASH (or bank reserves) for a loan that pays interest. They go from 0% upside to a few percent in interest in upside.

A crypto investor is not investing cash, he is investing coins that he is massively bullish, its a different equation. And these companies are all short upside calls on the volatility of crypto. If stocks can take the VIX to 90 (so 9x from calm times), I'd say that crypto can do the same, or worse.

When people think 'these companies are safe' its a statement that might reflect reality now but it also changes that reality (reflexivity) because then they have more clients/loans, pay less in interest and are even more exposed to a big jump in volatility of crypto (short upside calls on volatility), they are not regulated and dont have capital requirements that I'm aware. In the mean time you risk a huge upside to pick up nickels. It just doesn't add up
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It will not be a good look for me to defend Celsius (or Nexo) due to my vested interests.

The audit was with Chainalysis and there are community of Celsius investors that constantly watch the blockchain. It's one of the advantages of a public ledger open to everyone. https://celsians.com/celsius-network-audit/

I thought you were interested in learning about the industry when you opened the thread but it seems like you made up your mind. Good luck to you, I won't pollute your thread any longer.
 
MrMuppet said:
Could you once and for all explain what you mean by "these companies" ???
Are you referring to exchanges, lenders, token projects, OTC market makers...

You just throw a punch of words around but you don't seem to have any clue of what you are talking about.

In addition, do you really believe any bigger player runs an unhedged book and is exposed to 100% volatility. Come on...
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Dude, are you mentally retarded? Its a thread about these crypto staking companies, wtf do you think I'm referring to when I say these companies? jesus christ

And I'm not talking about an hedged book exposed to volatility, I'm talking about a DE FACTO exposure to a significant rise in volatility leading to losses in their lending book as people get liquidated in a crashing market with poor liquidity leading to capital losses to these companies (or to their clients).

Stock brokers routinetly lose money in situations like this and these companies are not immute to it.
Yes its a 24/7 market but liquidity matters and the bigger these companies get the more they ALL will be liquidating at the same time since crypto markets are super correlated.
In fact this reminds of portfolio insurance in the 1987 crash, which also caused more selling on the way down. When you combine this with the unregulated crypto future brokers that ALSO will be liquidating people on the way down, this is pretty much a ticking time bomb that will lead to a cascade of bankrupties when crypto has a big crash. ESPECIALLY if enough people think they are safe and keep pilling on
 
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Easy cowboy!

All I have to say to this:
1. There are no brokers in crypto.
2. All you have access to is lending facilities that offer overcollateralized loans, so a liquidation cascade won't have an effect on the company. Books are hedged with derivatives against tail risk.
3. BTC crashed to 3800 in March. One of the bigger nukes so far. No lending facility went bankrupt.

I guess you made up your mind, so I have to repeat again: This market is not for you.
 
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