How does a 9.3% savings account sound?

[jacoavlu]

Clickbait title, kind of but not really

Stablecoins are cryptocurrencies that are designed to be stable, have minimal volatilty. This discussion centers around popular stablecoins USDT, USDC, and GUSD - these are designed to have a $1 price.

There are lots of sensible reasons why stablecoins exist, mainly to have a stable "digital dollar" that exists in the same world as other crypto assets like Bitcoin. No bank account required. Anyone in the world can park funds in a designed-to-be-stable assed pegged to the US dollar, move those funds around the world, move those funds into and out of other crypto assets, and stay "on the rails" of the crypto system as opposed to having to off ramp to USD in a bank account, which for many outside of the US may not be a possibility.

What intrigues me and immediately strikes me as 100% too good to be true, is a BlockFI interest account where you can deposit stablecoins and earn significant interest. USDC is paying 8.6%. USDT is paying over 9%.

At this moment, USDT is trading at 0.998371 and USDC 0.999887.

BlockFI is one of these crypto neobanks where you can buy crypto, earn interest on crypto held there (whether you purchase there or elsewhere and transfer it in), and take out fiat loans against deposited crypto assets.

I'm seriously considering taking the plunge a buying some purely to park for interest. Obviously there is risk, this isn't an FDIC insured account and there is no guarantee of return of principle.

But the stablecoin environment seems in my not-heavily-researched opinion to be reasonably mature so as to make the risk-reward favorable, compared to current alternative investment options for cash, with fixed income paying very little and an inflated equities market that feels very toppish.

So let's discuss.

[CordMcNally]

No minimum balances, too. I wonder what the angle is.

[Hank]

Sounds risky.

[jacoavlu]

Sounds risky.

fully agree you're kidding yourself if you think there isn't risk. If it paid 2% it wouldn't get a second glance. 8% is different.

[Peds]

sounds ponzi like

[CordMcNally]

sounds ponzi like

Ponzi's are fine as long as you get in and out early.

[formerly_cn]

sounds ponzi like

yep. How are they generating those returns?

[jacoavlu]

sounds ponzi like

how so? that implies there are nefarious actors at the top.

Let's discuss.

So, their goal is that I deposit my stablecoin, and they do what with it? Run off laughing to the bank? They have someplace that they exchange my stablecoin for something more than a dollar? Or I try to withdraw and there's nothing there?

That USDT and USDC and GUSD are all aligned and it's a scheme coming from them?

[Lordosis]

If you do this I suggest you only put in a modest amount and after a reasonable period of time like a couple months try to take it out and see what happens.


If it sounds too go to be true...

[Turf Doc]

never heard of stable coin but i just looked it up and this seems extremely concerning:

https://coingeek.com/crypto-crime-cartel-the-end-is-nigh-for-tether/

[jacoavlu]

never heard of stable coin but i just looked it up and this seems extremely concerning:

https://coingeek.com/crypto-crime-ca...gh-for-tether/

There have been and continue to be concerns about Tether and their backing, or lack there of, by fiat USD. A lot has been and continues to be written about this. Here are two podcasts that discuss:

https://podcasts.apple.com/us/podcast/motion-tether-has-always-been-acting-in-bad-faith-bennett/id1493609456?i=1000505260909

https://podcasts.apple.com/us/podcast/motion-tether-will-likely-get-crushed-by-authorities/id1493609456?i=1000501266448

Travis Kimmel on twitter has done some pretty deep diving on this https://twitter.com/coloradotravis

Very much reasonable to be careful about Tether.
I am not aware of similar concerns about USDC or GUSD.

[jacoavlu]

If you do this I suggest you only put in a modest amount and after a reasonable period of time like a couple months try to take it out and see what happens.


If it sounds too go to be true...

I’m going to do this. Probably split between GUSD and USDC.

GUSD is their default stablecoin that you purchase 1:1 when you deposit USD

USDC you have to buy on an exchange like Coinbase or Kraken and transfer in

there are other places paying even more. Celsius pays 10.5% on these stablecoins

[Turf Doc]

Obviously the bank is doing something with your coins... but what? what could they possibly be doing that is better than the "guaranteed" 8.6% (not seeing 9.3% anymore) rate they're paying you? hard to see anything that couldn't easily result in you losing all your money...

assuming youre not gonna put so much in it really makes a difference. and if youre not gonna do that the question is is it really worth the trouble

[jacoavlu]

Obviously the bank is doing something with your coins... but what? what could they possibly be doing that is better than the "guaranteed" 8.6% (not seeing 9.3% anymore) rate they're paying you? hard to see anything that couldn't easily result in you losing all your money...

https://help.blockfi.com/hc/en-us/ar...to-at-BlockFi-

How does BlockFi custody assets? / What are the risks with depositing my crypto at BlockFi?

• Published September 8, 2020

When clients send crypto to their BlockFi account or purchase additional crypto within the BlockFi Interest Account, that digital asset is replaced with an obligation to return the same amount of that crypto plus any interest earned. 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, BitGo, and Coinbase; (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. The credit risks to these institutions are mitigated by credit due diligence and/or collateral (such as cash, crypto, or other assets).


Digital currency is not legal tender, is not backed by any government, and the BlockFi Interest Account is not a bank account nor a brokerage account, and is not subject to FDIC, SIPC, or other similar protections. Interest rates, withdrawal limits, and fees are subject to change and are largely dictated by market conditions. This is not a risk-free product and loss of principal is possible.

[Lordosis]

I’m going to do this. Probably split between GUSD and USDC.

GUSD is their default stablecoin that you purchase 1:1 when you deposit USD

USDC you have to buy on an exchange like Coinbase or Kraken and transfer in

there are other places paying even more. Celsius pays 10.5% on these stablecoins

How much are you putting into this venture if you don't mind the question?

Keep us posted.