Despite the collapse in lending crypto-dividends in the current bear market, some investors are in it in the long run and are not changing their strategy.
Outrageous annual returns of 25,000% are not unheard of for experienced crypto investors who make money through dividend breeding or token efforts.
However, the current cryptocurrency winter has seen much of this kind of yield evaporate, although exact amounts are difficult to determine. It is unclear whether investors will recover their crypto from banks and industry-related platforms, which have been hit hard by the recent market downturn.
But it also depends on whether the institutions involved in these problems are established actors or experimental startups. A 55-year-old law enforcer, Craig Bowman, who lends USDC stablecoin, is convinced the token will retain its bond to the U.S. dollar because Circle, the issuer of the USDC, has been audited and backed by guarantees.
The veteran trader even estimates that his investments can give him a return of 9%, which is still better than the 0.5% that a traditional bank offers.
Two basic ways to lend and earn interest
Yield breeding is often responsible for high yields. This process has been criticized by notable names in the field, including FTX CEO Sam Bankman-Fried in an interview on the Bloomberg Odd Lots podcast.
It involves giving the crypto institution a traditional cryptocurrency in exchange for a “governance token” that gives its holder the right to vote and a special share in the platform. The institution then lends the depositor’s primary cryptocurrency for a fee.
The governance token can be sold on another cryptocurrency exchange, and the more people use the platform, the more valuable the governance token becomes. Your original crypto will be returned to you after some time.
At stake, the number of placed coins improves the chances of being selected to secure a network against an attack of 51%. To their horror, TerraUSD investors found that deposited tokens could not be withdrawn.
Crypto Winter Bites DeFi lending
New York resident Nhat Nguyen entered the lending-related area about eight months ago through the Avalanche token he borrowed. When the market crashed, she took a loss of $ 2,000, but she continued to try to make money by lending stack coins.
After leaving Wall Street positions at JPMorgan and Goldman Sachs, Nguyen now works in a crypto business and is confident that others will continue to grow despite the inevitable downfall of some companies in the cryptosphere. In other words, this upheaval is not the end of everything.
Others, however, are not so optimistic. 25-year-old Lukas Levert, who invested $ 25,000 by borrowing various coins, says he is pulling out of the business amid the constant sale of digital assets by investors.
It will return when the market stabilizes again. Delivered selection here highlights how interconnected the ecosystem is.
Several events have penetrated deep into the depths of decentralized finance. Thus, the collapse of the stable currency TerraUSD, the difficulties of the lender Celsius, which suspended withdrawals or the massive firings of Coinbase, BlockFi and BitPanda, have all weakened the DeFi ecosystem.
The total value locked in decentralized protocols has fallen by 60% since January to about $ 39 billion, according to DeFiPulse.
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