Thursday, May 23, 2019

Crypto HIGH YIELD USD Savings Accounts?

I'll be quick, so less story and talk cock from me.

In crypto, there are things called "Stablecoins".

They are called stablecoins because, obviously, they are SUPPOSED to be stable to that thing that they are tracking.

Why they exist. How they exist. Out of today's scope, please do own reading.

Stablecoins exist in a lot of forms, but most commonly in USD.

For USD, there are quite a few stablecoins. To name the top few:
USDT
TUSD
USDC
PAX
SDUSD
USDS
DAI
sUSD
NUSD
etc, etc.

Now, with these stablecoins, you can earn anywhere between 6-15% APR on them. With no lock up. Interests are usually calculated daily.

Why they can pay interest. How they can pay interest. Out of today's scope, please do own reading.

But yes, the rate, is, ridiculous.

I know, that's why I'm sharing it.

Nexo does 6.5% APR for most stablecoins.
Celsius does 7.1% non-compounded for a handful as well.
Dapps like Nuo, dydx and Compound have floating rates between 6-15% APR.

Okay, what's the risks? Let's hear it.

The biggest risk is user stupidity - ie losing your private keys, sending to wrong address, withdrawing to wrong address etc etc. Just general lack of blockchain knowledge and experience interacting with it.

On top of that, the risks are the 3rd parties involved, which are (1) the stablecoin issuer and (2) the service giving you the "interest".

The next risk is how "safe" are they? Maybe the smart contracts have a vulnerability? Maybe the collateral given to the services are illiquid or cannot be sold to realize its appraised value?

There are quite a bit of risks involved, I will say that.

But, everything in life got risk. You walk across the road also got risk car kill you. You just need to evaluate the likelihood of it and if its worth the risk.

Personally, for the last few months, I've deposited some stablecoins into one of those providers and I have been earning ~14% APR.

So 14% APR in USD. Heck, if I wasn't deeply involved in crypto and targetting triple digit returns, I'd cash out my entire traditional portfolio (what I had back then) and dump it all into stablecoins and eat the yield.

I wouldn't be surprised if a simple crypto USD lending portfolio will massively outperform any fixed income fund, and half of equity funds.

Anyway, just wanted to share. This seems like something less radical that some people could accept.

Do your own homework though. All the best, crypto is wild. Okay, back to Twitter I go.

5 comments:

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