Are we excited yet?

Badly fukt

Badly fukt wrote: »

This is what the bank should be giving you on a depreciating currency. You can get 12% on stablecoins like USDC that are pegged to the dollar.

Where does that 12% come from?

Shamo

Deleted User wrote: »

Where does that 12% come from?

You lend a patform USDC at 12% then someone else is borrowing it for higher due to buying the dip or similar. The USDC lending rates were getting insane at the end of the last bull session. No one is going to give you 12% if they can't make more back elsewhere.

If max pro bear hits you might see non-fiat coins spiking in APR as interest in borrowing those increases in other to short them.

There's then the whole other degen DeFi world of high inflationary coins like CAKE that still give 80-100% APR although that's definitely not sustainable in my opinion if a full bear market hits.

shakedown

Deleted User wrote: »

Where does that 12% come from?

People that want to borrow for leverage.

Deep explanation from Hasu:
https://www.youtube.com/watch?v=TJ6MQsjOS0I

Donald Trump

What credit risk mitigation do you have there? Are you just depending on the platform being able to pay you back even if the "borrower" doesn't pay it back to them?

Seems very risky. The platform may well indeed have assets of the borrower as collateral but if that collateral is cryptocurrency itself than that correlation further increases the risk massively.
One would also have to imagine that there would be a massive default correlation among borrowers. What does the platform have in terms of its own assets for you?

Perhaps your risk is ironically reduced by the fact that the token you loaned to the platform might crash as well.

Dohnjoe

Donald Trump wrote: »

What credit risk mitigation do you have there? Are you just depending on the platform being able to pay you back even if the "borrower" doesn't pay it back to them?

Seems very risky. The platform may well indeed have assets of the borrower as collateral but if that collateral is cryptocurrency itself than that correlation further increases the risk massively.
One would also have to imagine that there would be a massive default correlation among borrowers. What does the platform have in terms of its own assets for you?

Perhaps your risk is ironically reduced by the fact that the token you loaned to the platform might crash as well.

I don't think many people in crypto truly understand the level of risk involved. For example, I've seen returns USDT compared to interest rates on the dollar. Holding Tether on a crypto exchange is exponentially more risky than holding USD in a regulated, externally rated, US bank. We've gone from people saying never hold your crypto on an exchange to people locking up billions in DeFi and trusting those platforms.

Shamo

Donald Trump wrote: »

What credit risk mitigation do you have there? Are you just depending on the platform being able to pay you back even if the "borrower" doesn't pay it back to them?

Seems very risky. The platform may well indeed have assets of the borrower as collateral but if that collateral is cryptocurrency itself than that correlation further increases the risk massively.
One would also have to imagine that there would be a massive default correlation among borrowers. What does the platform have in terms of its own assets for you?

Perhaps your risk is ironically reduced by the fact that the token you loaned to the platform might crash as well.

Any decent borrowing platform will only loan someone a certain % of their deposited collateral, usually in the region of 45-60%. Crypto is risky but gives higher reward (if you time it), that's the choice. Ever since investing in it over the years I've been fully aware it can go to 0.

Donald Trump

Shamo wrote: »

Any decent borrowing platform will only loan someone a certain % of their deposited collateral, usually in the region of 45-60%. Crypto is risky but gives higher reward (if you time it), that's the choice. Ever since investing in it over the years I've been fully aware it can go to 0.

I'm talking about the credit risk. A 40% haircut does not seem conservative to me from what I see historically, never mind projecting worst case scenarios.


Are the exchanges themselves rehypothecating this collateral to other exchanges?

Irish_rat

Dohnjoe wrote: »

I don't think many people in crypto truly understand the level of risk involved. For example, I've seen returns USDT compared to interest rates on the dollar. Holding Tether on a crypto exchange is exponentially more risky than holding USD in a regulated, externally rated, US bank. We've gone from people saying never hold your crypto on an exchange to people locking up billions in DeFi and trusting those platforms.

Tether is the biggest ponzi scheme in crypto and will fall like a pack of cards in due course. There is no doubt that locking up USDT is high risk and people should understand the risks involved here. I would only be putting in as much as one can afford to lose. Defi just adds even more risk to the above.

Not your keys not your crypto still applies if you value your wealth

Shamo

Donald Trump wrote: »

I'm talking about the credit risk.


Are the exchanges themselves rehypothecating this collateral to other exchanges?

There's no guarantees they aren't is the view I'd have. If you look at Coinbase, being the most regulated, they note that collateral is stored and not moved/used. Whether that is a regulated statement or something they can ignore and not get fined for is another story. Borrow/Lend seems to be only available in the US though.

Coinbase are also the only exchange I found that offer a statement of transactions that banks accept as source of funds. Unregulated exchanges like Binance don't bother giving you anything with your name on it officially. This is a side note but worth mentioning for anyone thinking of withdrawing decent amount of funds to your real bank account.

Dohnjoe

Shamo wrote: »

There's no guarantees they aren't is the view I'd have. If you look at Coinbase, being the most regulated, they note that collateral is stored and not moved/used.

I don't think Coinbase are properly regulated at all. They adhere to certain laws/rules based on jurisdiction, and it seems that's just for their fiat operations.

For their crypto, I'm not aware of any formal regulation, unless I am mistaken, we just have to "take their word" on it.

Dohnjoe

Shamo wrote: »

Coinbase are also the only exchange I found that offer a statement of transactions that banks accept as source of funds. Unregulated exchanges like Binance don't bother giving you anything with your name on it officially. This is a side note but worth mentioning for anyone thinking of withdrawing decent amount of funds to your real bank account.

My bank accepted both. CB is just neater and more presentable, Binance's is a mess.

Shamo

Dohnjoe wrote: »

My bank accepted both. CB is just neater and more presentable, Binance's is a mess.

Out of interest, how/where did you produce a statement with your name on it on the Binance website?

Dohnjoe

Shamo wrote: »

Out of interest, how/where did you produce a statement with your name on it on the Binance website?

I used the reports section to generate reports, and then a snapshot of the account details to show the account belonged to me (sending an email to the bank from the email address you have registered your Binance/crypto account helps)

None of this is formalised, so I'd have serious words with any bank failing to accept those kind of details (SoF, DoF) from Binance if they accepted them from any other exchange.

Shamo

Dohnjoe wrote: »

I used the reports section to generate reports, and then a snapshot of the account details to show the account belonged to me (sending an email to the bank from the email address you have registered your Binance/crypto account helps)

None of this is formalised, so I'd have serious words with any bank failing to accept those kind of details (SoF, DoF) from Binance if they accepted them from any other exchange.

No exceptions were made from this bank and when they say "statement of transactions" that means an official one supplied by the exchange and no amount of screenshots helped that until I went with Coinbase instead. Incredibly frustrating but couldn't get around it for the thing I was applying for.

Bob24

Donald Trump wrote: »

I'm talking about the credit risk. A 40% haircut does not seem conservative to me from what I see historically, never mind projecting worst case scenarios.

Are the exchanges themselves rehypothecating this collateral to other exchanges?

If you want to borrow stablecoins from a platform like Celsius, the maximum LTV they will offer you is 50% (see here).

I.e. of you are borrowing $1000 worth of stable coins against your bitcoins, you have to post minimum $2000 worth of BTC as a collateral.

If the price of bitcoin drops and consequently your LTV moves above 50%, they will request you to urgently post additional collateral to bring it back to 50%.

And if it moves close to 100%, your collateral will automatically be liquidated to repay the loan is full.

With the above in mind, there is no possible haircut at any stage because at all times the loan is at least 100% collateralised, and there is an automated collateral liquidation process which will never let it go below that number.

If you change hat and become the person lending out their stable coins, because of the above there is basically no credit risk related to the actual borrower. Your risks are more related to the possibility of the lending platform not doing its job preoperly with regards to collateralisation/custody/liquidation, or an implosion of the stable-coin in which you are lending.

And yes they are doing (fully collateralised) rehypothecation. This explain that the interests they are offering on deposits are higher than some of their lending rates.

Donald Trump

Bob24 wrote: »

If you want to borrow stablecoins from a platform like Celsius, the maximum LTV they will offer you is 50%.

I.e. of you are borrowing $1000 worth of stable coins against your bitcoins, you have to post minimum $2000 worth of BTC as a collateral.

If the price of bitcoin drops and consequently your LTV moves above 50%, they will request you to urgently post additional collateral to bring it back to 50%.

And if it moves close to 100%, your collateral will automatically be liquidated to repay the loan is full.

With the above in mind, there is no possible haircut at any stage because at all times the loan is at least 100% collateralised and and there is an automated collateral liquidation process which will never let it go below that number.
If you change hat and become the person lending out their stable coins, because of the above there is basically no credit risk related to the final borrower. Your risks are more related to the possibility of the lending platform not doing its job correctly, or an implosion of the stable-coin in which you are lending.

The haircut is on the collateral posted.


Your explanation is very naive. You would need to give me facts and figures to back that up. In the event of a sudden drop, the liquidation of the "collateral" may be large enough to amplify the initial drop. You will have a massive correlation there - basically all those leveraged up that way will get closed out at the same time. And I would imagine that they are likely mainly exposed in the same direction. You have no guarantee that they will be able to be closed out at any given level. They likely have additional buffers built into when they trigger the closing out (i.e. it won't wait til it gets to par level with the collateral) but there would still be no guarantee that they would find a buyer in the event of a large sudden drop.

Bob24

Donald Trump wrote: »

Your explanation is very naive.

I concede then, you have made a great point ;-)

Or if we can step out of the school playground and go back to an adult discussion:

Donald Trump wrote: »

You would need to give me facts and figures to back that up. In the event of a sudden drop, the liquidation of the "collateral" may be large enough to amplify the initial drop. You will have a massive correlation there - basically all those leveraged up that way will get closed out at the same time. And I would imagine that they are likely mainly exposed in the same direction. You have no guarantee that they will be able to be closed out at any given level. They likely have additional buffers built into when they trigger the closing out (i.e. it won't wait til it gets to par level with the collateral) but there would still be no guarantee that they would find a buyer in the event of a large sudden drop.

The max LTV figure my exemple is based on is on their website (I had provided a link).

And yes of course we agree there is a domino effect when liquidations start, this is why when the price of BTC starts moving it can be very violent in either direction. However unless the market becomes completely illiquid (which to date has never happened even during the worse crashes), collaterals can and will be liquidated. As you said they have a buffer and they won't wait for the collateral to be just enough before they liquidate. I would agree this is something to monitor and if lending platform were to become massive to a point whereby most bitcoins are locked in there, there could be liquidity issues. But to date I definitely wouldn't say this is the case.

Actually, BTC crashed 30% in just over a week back in May which is a massive stress-test for any market. And there was no issue with CeFi lenders and DeFi algorithmic liquidations. So we did get some kind if real world test of the system.

And to finish, don't get me wrong, people should understand what they are doing and obviously a 10% yield on a asset pegged to the USD means there has to be an explanation for it (some of it being a certain risk exposure and some being more structural reasons).

If someone is trying to understand those high yields, I'd say the below 4 reasons (in no particular order) are to be considered:
1) There is some level of risk associated to holding stable coins
2) There is some level of risk associated to the management of the lending platform or possible flaws with DeFi lending algorithms*
3) Crypto lending platforms and DeFi platforms are redistributing to depositors *a lot more* of the loan profits compared to banks
4) Since this is something relatively new, the limited pool of available liquidity to be lend-out v.s. demand can sometimes push up the rates significantly when demand is high (rates might drop overtime if people are depositing en masse while demande for loans isn’t rising as quickly)

* credit risk from the borrower can be included here but is only a minor aspect if it is correctly managed

Bob24

yaknowski wrote: »

Binance banned by UK financial regulator.

Interesting piece of news ...

I actually never recommend Binance because they have a very unclear web of loosely related entities and it isn't quite clear what the main entity is, where it is based, and which regulators it is answering to. There are other players in the industry which are a lot more clear about these things and their regulatory compliance efforts. So I can't say I am surprised.

Having said that, what I can see here from the FCA is that "Binance Markets Limited is not permitted to undertake any regulated activity in the UK". Not sure this is a full ban and we need to understand what "regulated activity" means in this context. The same press release states "While we don’t regulate cryptoassets like Bitcoin or Ether, we do regulate certain cryptoasset derivatives", could that mean a crypto brokerage service is OK but derivatives are a non-starter? (we probably need to wait and see to have an answer)

Dohnjoe

Shamo wrote: »

No exceptions were made from this bank and when they say "statement of transactions" that means an official one supplied by the exchange and no amount of screenshots helped that until I went with Coinbase instead. Incredibly frustrating but couldn't get around it for the thing I was applying for.

Not good, the whole thing is a mess. There's no standardisation or "formal" approach to this yet. All the bank wants is to comply with regulators making sure they have vetted your SoF properly, that it hasn't come from laundering, crime, etc. I presented mine as quite a lengthy in-depth piece, with an index and numerous attachments. I work in finance, so I speak "bank", perhaps that helped.

Timmaay

My waves.exchange usdt staking returns dropped from over 30% apr to 13% in the last week or so, that's not worth it for me anymore given the risks so I'm withdrawing it from there. In any case I'll need to cash out my usdt and put it back to euro cash to fund a property purchase soon, whats the best and cheapest way to get it back to myown bank account?

Donald Trump

Bob24 wrote: »

I concede then, you have made a great point ;-)

Or if we can step out of the school playground and go back to an adult discussion:

I did not say that you were naive. I said your explanation was naive. It was an explanation of the controls and how they are supposed to work. That would be a nice introduction to someone who didn't understand how they work. While those mitigations will of course help, people should not be under the impression that they do not leave other residual risks.



David Li published a simple way to value baskets in the late 90's or early 2000s. He understood the limitations of his approach but most didn't. It was fine until it didn't work and then we had a global financial crisis. Most never considered the additional risks. People always need to be aware of limitations

bennyineire

Revolut looking safer and safer as time goes by, I use it and its ridiculously easy and quick

Luckycharms_74

Just came across this guy over the weekend. Seems like a very smart guy and lots of interesting stuff regarding crypto and blockchain.

Quincy Jones conversation, XRP, XDC, AGLO, XLM, Bitcoin, Flare, Corda, ISO 20022 & Smart Contracts

SnuggyBear

bennyineire wrote: »

Revolut looking safer and safer as time goes by, I use it and its ridiculously easy and quick

Do you actually own the crypto off revolut?

fritzelly

SnuggyBear wrote: »

Do you actually own the crypto off revolut?

No

olestoepoke

bennyineire wrote: »

Revolut looking safer and safer as time goes by, I use it and its ridiculously easy and quick

Im pretty sure you dont actually own the crypto you buy on Revolut so no thanks, not looking safer for me. Try and move your crypto from Revolut to a cold wallet see how successful you are.

DeSelby83

olestoepoke wrote: »

Im pretty sure you dont actually own the crypto you buy on Revolut so no thanks, not looking safer for me. Try and move your crypto from Revolut to a cold wallet see how successful you are.

I think this is in beta in the US or maybe UK at the moment where you can transfer your crypto to a cold wallet.

SortingYouOut

DeSelby83 wrote: »

I think this is in beta in the US or maybe UK at the moment where you can transfer your crypto to a cold wallet.

There is no crypto to transfer though, don't Revolut take your money and back it off the crypto price but don't actually purchase any crypto?

cnocbui

SortingYouOut wrote: »

There is no crypto to transfer though, don't Revolut take your money and back it off the crypto price but don't actually purchase any crypto?

Nope.

Do I own my crypto if I use Revolut?

Yes. We recently changed our terms and conditions to make sure this is the case, because we know it’s an important point for you guys. When you click buy (or sell) on any of the cryptocurrencies in Revolut, you are instructing us to buy (or sell) these currencies on your behalf in the open market. Revolut uses third party custodians to look after your crypto for you, but you own it.

https://blog.revolut.com/burning-questions-about-revolut-crypto/

SortingYouOut

cnocbui wrote: »

Nope.

https://blog.revolut.com/burning-questions-about-revolut-crypto/

Ah ok, that used to be the case though right?

Well then they could start bringing in wallet transfers no doubt.