Interest payments for crypto (>3%) or USD Stablecoins (>8%)

[MrCheese]

@IdleThought

You can earn 8.6% interest rate on USDC

Didn’t the dollar lose around 10% against CHF last year? If the inflation stays at the current levels 8.6% is not even a good deal.

[Oliv]

That’s the beauty of it, borrow USD to buy more bitcoin and pay the interest rate in CHF thanks to your salary.

Edit: I am speaking about borrowing vs btc in general

[IdleThought]

Well I have USD, CHF and EUR.

[s-g]

@lowyield

Title is a bit misleading, I understand USD coins have an interest paid, but not the fiat currency.

I agree, please correct the title since the 8% interest is not given on “US dollars” but on USDC, which is a pretty important difference.

[IdleThought]

et voila! done

[lowyield]

And let’s not forget minus USD-USDC conversion fees (and back, I assume).

[lowyield]

Hi @Oliv, it’s interesting… I’m trying to see what would happen in a market swing, can you make a numerical example with the LTV?

When creating an Offer, Lend at Hodl Hodl offers its customers the choice of an LTV ratio between 30% and 70% for fiat-equivalent Stablecoins, and a fixed LTV of 80% for WBTC.

[Oliv]

@lowyield

Hi @Oliv, it’s interesting… I’m trying to see what would happen in a market swing, can you make a numerical example with the LTV?

Sure, here is a simple explanation. You are alerted at 75% 80% 85% and 90%:

LTV ratio determines the relative amount of the collateral the Borrower will need to lock in escrow in order to proceed. Higher LTV ratio entails a higher risk of contract liquidation. LTV is calculated by dividing the debt amount (including interest) by the LTV % chosen.

Example 1. Input: 30% LTV, 100 USDC, 3% Interest rate. Collateral amount: (100+3%)/30%=343 USDC (to be converted into BTC at the current exchange rate)

Example 2. Input: 70% LTV, 100 USDC, 3% Interest rate. Collateral amount: (100+3%)/70%=147 USDC (to be converted into BTC at the current exchange rate)

For the Forced liquidation to occur, LTV has to reach 90%.

[IdleThought]

Fairly minor cost if you use kraken

[lowyield]

Thanks!
I’m unfortunately not able to check this week, but perhaps you already did… are there instances where the market swing is so severe (e.g. drop in value) that between 70% LTV and forced liquidation (90%) occurs within a day or so?

In such cases, wouldn’t it be an exposure from the side of the lender? i.e. forced liquidation doesn’t returns your capital because by then the collateral value is already lower than borrowed amount?

[Oliv]

Theoretically yes, but that’s also why it is triggered at 90%, so that you have 10% buffer. If it is triggered I believe you will have the btc collateral in less than an hour.

[lowyield]

So, I’ve been giving the topic some consideration, and may have found the right use case… tax money.

See this post:

Better use of money being put aside for yearly taxes

ok soooo lets experiment! as i told you if i act on anything i will share and you can learn from my mistakes. So i had few USDT lying around in binance doing nothing so iam trying the following 1000 USDT on a flexible savings account expected annual return 6% 1000 USDT on a 7 day locked savings account expected annual return 6.3% 1000 USDT in a liquid swap paired with DAI with annual return 11.5% will check 7 days later and report back with what happened : )

[IdleThought]

Quick update : I moved a bunch of money in and out without any issues. Still very happy with Blockfi

[nabalzbhf]

What’s even weirder with those return is that people seem to pay to get other people to hold bitcoin for them.

from Money Stuff: Maybe SPACs Are Really IPOs - Bloomberg

What this means is that in theory (I stress, in theory) you could go long spot Bitcoin, while shorting the December future, and if you just wait for the two to converge then that’s an easy 8% return in 12 months.