Crypto Platforms Are Cutting Interest Rates, Why?

in LeoFinance3 years ago

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The good old days of sticking your crypto into a platform and earning 6% are well... Over!

Platforms such as BlockFi, Ledn and Genesis have cut interest rates primarily on large scale deposits.

These platforms use to pay out 4% - 6% APY on crypto such as Bitcoin however have recently drastically cute these rates primarily for large account of 1 BTC - 20BTC.

While smaller accounts of 1 BTC or less will most likely not see a change large accounts are now seeing a change of 1% o r more. Larger accounts now earning just 0.5% (dang kind of sounds like a savings account bank right now) With that being said I have a firm feeling we might see a mass exodus of Funds from these platforms and instead invested elsewhere.

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The main reasoning for this is loans have seriously slowed down. A lot of those liquidity funds are simply sitting in there now doing nothing and waiting to be lent out. In a way you could almost look at this as a pulse of the industry for crypto. However the other side of that is there are MANY platforms providing this and DeFi which means those who want the funds now have plenty of options. When there are plenty of options there are cuts and reductions in order to battle it out over other companies who are doing the same thing. You do this yourself when you go look for a mortgage or a car loan. You look for the lowest possible rate from every lender you possibly can find.

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Does that mean the demand for crypto is drying up?

Possibly in the short term yes but as we we all know it doesn't take much for the markets to rally once again. In fact them seem to be hitting a new pace right now. I believe much of this will fuel an alt coin season and one that could last for a very long time.

Bitcoin new supplies are starting to dry up due to the last halving, people hodling it and simple bitcoin that has been lost never to be recovered. It is also SLOW and clunky. Besides be a store of value the blockchain itself really doesn't do much. Instead it's an acting entry point for people to start investing into other crypto projects.

In order for bitcoin to hit a 100% gain it needs to double in price. That's now nearly $120,000 value.

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Someone could instead invest a small amount into a new crypto start up project and see 20,000% gains. This is what drives the alt coin season and new project start ups. Bitcoin will continue to be harder and hard to see the massive gains so many have gotten use to. While 7% is no small matter we have been spoiled in the crypto space for a very long time with multiple hundred% gains and thousands of % gains.

Get ready for some mega capital moves into altcoins! But don't invest in every random crazy projects. Do your research first and if it's something you really believe in then consider investing.
*This article is not investment advice and is for entertainment purposes only.

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I'm in a few of these platforms and saw them cut the rates. You can still get the 6% or higher, if you hold a bunch of their tokens though...But I'm sure they will change things up moving forward to.

I find it interesting they implemented their own tokens as well. I kind of see a full shift to going DeFI and just paying out in their token and letting the market have at it. I pretty much believe this is what CUB does and DeFi in general?

Yeah I mean, in these centralized ones, you get a much better kick back if you choose to be paid out in their native token.

An extra 2-4% in some platforms.

True ,also klever changed the interest to be paid only to its own token KLV,nexo wallet too few weeks ago changed the staking terms,every time the rules changes to the savings and interest, staking etc ,so we can't trust them for long time because every time they changes the staking terms etc..

I could see a lot more places doing their own token. They would have more control over it and honestly could set any % rate they wished without running into any issue.

Yes ,you are right. Thanks for your post!

Unlike DeFi platforms which have tokens, the centralized ones have to find people to lend to. The tokens skew econ of the lending platforms with many lending for the sole reason to get the "mined" tokens. And like you said lending has thus been dried from the centralized ones with many people just using defi products for those sick yields. Ideally, all these token mining "hype" has to end soon to see a more realistic volume for DeFi but idk when lol. Might take a bear season of no hype to see a more realistic view

Does seem like DeFi has taken over these which is kind of good. In reality DeFi really isn't decentralized as we can tell from all the rug pulls that have happened. I thought the hype was going to die out about a month and a half ago but it just keeps going. This is feeling much different now than 2017 rally. The continued hype and use cases is growing such as NFTs, DeFi, People truly wanting decentralization social media and so on.

I played around with BlockFi and my balance there is less than 1 BTC. So I guess there will be less change for me. However I feel bad for the larger BTC holders who are seeing a reduced earning. Like you said, its probably due to the them needing to compete for the remaining loans but keep it economically feasible.

If they start reducing the interest rates for less than 1 BTC, then I will probably just pull out of the platform since I am more worried about their economic situation.

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If you have 1 BTC and up and you're not running the cantango trade or using on-chain multi-sig lending contracts like with HODL HODL then I'm sure it's because you don't care about yield

I mean even if you just split your 1 BTC across 2 or 3 platforms it would be a smarter choice! Big BTC holders aren't looking for 4-6% they locking in 30% spreads using futures

I don't have as much BTC as I still use the stock market. I haven't really tried the contango stuff or multi-sig lending contracts at all. I HODL some BTC and the other portion I put into BlockFi so I don't have to pay attention. I personally thought the business model makes sense after doing some research. Also they are based in the US so I expect my money to at least be partially returned back if anything went wrong. Though in the long term, I do plan to sell off half of my position in BlockFi to lock in profits and have a free ride.

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If you're US based are you also doing stablecoins in BlockFi I mean the return is far better than the banks right? Should be worth it? I do some stable coins and then turn that interest into sats so I am not spending my base value, its basically free sats every month lol

I was debating about it but I haven't yet. That does seem like a good idea but I don't know about risking so much money on stable coins on Blockfi. I only spent a few thousand before to put it into BTC, but with the run up in price, I am at sitting nicely in the green.

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Well if you take profits eventually you could park the profits in stable coins and collect the interest while you sit out any corrections! I don’t see a right or wrong way to play it just how much volatility you can stomach

Thankfully being a small time 2 bit player the interest rate changes didn't affect me too much and I'll probably still keep using them. Either way, 4-6% is still far better than 0.4% tops in the UK!

I know local platforms where they pay between 4 and 3 percent per year to ethereum and bitcoin, but with more stable cryptos such as USDC the rates are higher, is this normal? I think it depends on how much you invest

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Most do depend on how much you have within them now. 20+ BTC and you're looking at 0.5% hold under 1 BTC you're looking at around 4%. Kind of curious how that works seems odd to offer different rates for how much you are holding in accounts. Normally large funds get the higher APY so a little strange

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I think it might be a little like the "zero percent interest" thing that credit cards offer you on transferring balances. They want the assets under management so they offer you a high rate to begin with, and then they cut it down once they have you in. They count on people being lazy and still leery of "moving" things around. I know I hate having any of my assets "in transition". If they're in a place and the rate goes down but is still paying, I'll probably just keep it there.

The other possibility, and certainly a darker one, is that they've been lending out their customers assets to big banks trying to manipulate the prices and are finding out these banks have unlimited cash to keep shorting things but no actual tokens to pay them back. There could be some sort of "if we go down we take you with us" type of thing going on behind the scenes. Definitely bears watching...

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I actually see it the other way around to me it looks like smaller Bitcoin holders for example are fine because their interest payments are so small compared to the amount generated by the platform that it’s fine and it encourages long term lock up for smaller holders because moving on-chain again would cost you

The reason larger holders get a smaller fee is because they more often then not short term Parker’s of capital! Most of the 1 BTC plus crowd are locking their capital in to get dollars to buy Bitcoin for example abs trade it take the spread and cash out again

All I see is locking more Bitcoin up to trade Bitcoin which is positive! There’s also a growing interest in the Cantango trade so to me it’s actually a bullish thing!

If these platforms are not developing new protocols then they will not see much growth. If Cub manages to excite its investors by constantly introducing simple, automatic, and profitable farms, then it has a chance to capture the big chunk of the market.

I feel whether it's DeFi or Alt Coin, investing at an early stage is beneficial in the short term and the long term as well. High percentage gains would diminish over time.

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The brilliant about this
You stake and keep your call coins for possible rise while getting some interest
This mean hodl is not free you take profit also

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