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At 8.6% APY, would you say you believe you have a sub-8.6% chance of the funds disappearing in a given year? Considering that it would take over a decade to ret

At 8.6% APY, would you say you believe you have a sub-8.6% chance of the funds disappearing in a given year? Considering that it would take over a decade to return the original capital in value, I feel that the compensation is low relative to the risk of loss. Ten years is a lot of time for a company to bungle your funds, especially in the cryptocurrency world.

wcoenen 5y ago
> Considering that it would take over a decade to return the original capital in value I think only 8.4 years, because that's the doubling period for 8.6% (1.086^8.4 ≈ 2). Edit: but I guess it's indeed over a decade if you take tax into account
imtringued 5y ago
>At 8.6% APY, would you say you believe you have a sub-8.6% chance of the funds disappearing in a given year? Those 8.6% APY are only available for a month at most. The APY changes all the time as more people deposit their money.
- latchkey 5y ago
  Not true at all. 8.6 has been stable for over a year. It is also very very low compared with what you can get in DeFi (which is arguably higher risk).
nodesocket 5y ago
Sub 8.6% chance of funds disappearing? Absolutely! Listen, I'm no Berkshire Hathaway, but the likeyhood that BlockFi one of the world's largest holders of BitCoin and backed by $500+ million in VC funding just outright fails is very very low. I know, here come the Enron or Mt. Gox rebuttals. The regulation and oversight that BlockFi has is much greater than those other examples. It would be interesting if somebody could figure out the likelihood that BlockFi fails. Though I don't see how.
- droffel 5y ago
  Given that the 8.6% return is contingent on those funds being loaned out to third parties in a manner that involves risk (like margin trading), I am highly skeptical of their ability to not lose your money on the timeline of a decade. The trustworthiness of Blockfi doesn't matter if they mess up and end up loaning money to someone who ends up unable to pay the bill - and the person on the hook if the borrower does not pay is the lender of the capital. Not Blockfi. Why do you think the interest rates are so juicy? If it was as safe as you seem to think it is, why didn't they just pony up their own money? 8.6% is far above any standard investment vehicle at the moment. For a safe investment, it's free money!
  - dannyw 5y ago
    Dollar yields in the crypto universe have forever been higher. I've consistently got 12-25% per year from 2015 using exchanges like Bitfinex and haven't lost a single dollar. Why isn't it arbitrated away? Because institutions and market makers don't trust crypto. When they do, I'm sure it'll go as low as rest of market rates.
    - menzoic 5y ago
      If it goes as low as the rest of market rates then what's the advantage? I think it'll stay higher.
    - G3rn0ti 5y ago
      One of the reasons why the yields are higher for stable coins is they are not bound by central banks‘ interest rates. This is especially true for purely synthetic stable coins (DAI, sUSD, sEUR) because they don’t even need to be backed by the underlying asset. The other reason is they cut the middle man between a creditor and debtor i.e. banks. If banks started to sell financial products based on liquidity pools, they had a hard time to compete with places like compound or aave. However, they would set themselves free of the federal fund rate and therefore they could actually provide higher rates to their customers. So basically, rates would be rising everywhere.
Animats 5y ago
BlockFi says they are lending at 4.5% and accepting deposits at 8.5%. What's wrong with this picture?
- Clewza313 5y ago
  Let me get this straight: you can lend from BlockFi, deposit it straight back, and make a 4% profit?
  - alpenbazi 5y ago
    Ever heard of Flash Loan Attacks? https://coinmarketcap.com/alexandria/article/what-are-flash-loan-attacks https://coinmarketcap.com/alexandria/article/what-are-flash-...
  - fyzix 5y ago
    No, you don't earn interest on the collateral.
- MarkSweep 5y ago
  It makes more sense if you look at these rates: https://blockfi.com/rates/ https://blockfi.com/rates/ To qualify to borrow at 4.5%, you have to have a loan to value ratio of 20%. If I understand correctly, that means you have to deposit 5x crypt than the value of the loan. On the savings side, the rates vary. If you deposit BTC, you earn 5% for the first 0.5 coins, 2% for the next 19.5 coins, and 0.5% for the rest. Since the loans are secured, if the value of bitcoin does not move too much they can cover defaults by liquidating the collateral. Given the volatility of crypto currencies though, I still assume they will blow up at some point in the future.
  - Animats 5y ago
    They claim that if you deposit USDT, they pay 8.5%/year. They're effectively speculating that Tether will crash, and they get to pay you back with cheap Tethers.

wcoenen 5y ago

> Considering that it would take over a decade to return the original capital in value I think only 8.4 years, because that's the doubling period for 8.6% (1.086^8.4 ≈ 2). Edit: but I guess it's indeed over a decade if you take tax into account

imtringued 5y ago

>At 8.6% APY, would you say you believe you have a sub-8.6% chance of the funds disappearing in a given year? Those 8.6% APY are only available for a month at most. The APY changes all the time as more people deposit their money.

latchkey 5y ago
Not true at all. 8.6 has been stable for over a year. It is also very very low compared with what you can get in DeFi (which is arguably higher risk).

nodesocket 5y ago

Sub 8.6% chance of funds disappearing? Absolutely! Listen, I'm no Berkshire Hathaway, but the likeyhood that BlockFi one of the world's largest holders of BitCoin and backed by $500+ million in VC funding just outright fails is very very low. I know, here come the Enron or Mt. Gox rebuttals. The regulation and oversight that BlockFi has is much greater than those other examples. It would be interesting if somebody could figure out the likelihood that BlockFi fails. Though I don't see how.

droffel 5y ago
Given that the 8.6% return is contingent on those funds being loaned out to third parties in a manner that involves risk (like margin trading), I am highly skeptical of their ability to not lose your money on the timeline of a decade. The trustworthiness of Blockfi doesn't matter if they mess up and end up loaning money to someone who ends up unable to pay the bill - and the person on the hook if the borrower does not pay is the lender of the capital. Not Blockfi. Why do you think the interest rates are so juicy? If it was as safe as you seem to think it is, why didn't they just pony up their own money? 8.6% is far above any standard investment vehicle at the moment. For a safe investment, it's free money!
- dannyw 5y ago
  Dollar yields in the crypto universe have forever been higher. I've consistently got 12-25% per year from 2015 using exchanges like Bitfinex and haven't lost a single dollar. Why isn't it arbitrated away? Because institutions and market makers don't trust crypto. When they do, I'm sure it'll go as low as rest of market rates.
  - menzoic 5y ago
    If it goes as low as the rest of market rates then what's the advantage? I think it'll stay higher.
  - G3rn0ti 5y ago
    One of the reasons why the yields are higher for stable coins is they are not bound by central banks‘ interest rates. This is especially true for purely synthetic stable coins (DAI, sUSD, sEUR) because they don’t even need to be backed by the underlying asset. The other reason is they cut the middle man between a creditor and debtor i.e. banks. If banks started to sell financial products based on liquidity pools, they had a hard time to compete with places like compound or aave. However, they would set themselves free of the federal fund rate and therefore they could actually provide higher rates to their customers. So basically, rates would be rising everywhere.

Animats 5y ago

BlockFi says they are lending at 4.5% and accepting deposits at 8.5%. What's wrong with this picture?

Clewza313 5y ago
Let me get this straight: you can lend from BlockFi, deposit it straight back, and make a 4% profit?
- alpenbazi 5y ago
  Ever heard of Flash Loan Attacks? https://coinmarketcap.com/alexandria/article/what-are-flash-loan-attacks https://coinmarketcap.com/alexandria/article/what-are-flash-...
- fyzix 5y ago
  No, you don't earn interest on the collateral.
MarkSweep 5y ago
It makes more sense if you look at these rates: https://blockfi.com/rates/ https://blockfi.com/rates/ To qualify to borrow at 4.5%, you have to have a loan to value ratio of 20%. If I understand correctly, that means you have to deposit 5x crypt than the value of the loan. On the savings side, the rates vary. If you deposit BTC, you earn 5% for the first 0.5 coins, 2% for the next 19.5 coins, and 0.5% for the rest. Since the loans are secured, if the value of bitcoin does not move too much they can cover defaults by liquidating the collateral. Given the volatility of crypto currencies though, I still assume they will blow up at some point in the future.
- Animats 5y ago
  They claim that if you deposit USDT, they pay 8.5%/year. They're effectively speculating that Tether will crash, and they get to pay you back with cheap Tethers.