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I hold a decent sized block of USDC via BlockFi and earn 8.6% APY. I realize there is inherent risk (after all, I am earning 8.6%) but compare that to 0.5% earn

I hold a decent sized block of USDC via BlockFi and earn 8.6% APY. I realize there is inherent risk (after all, I am earning 8.6%) but compare that to 0.5% earned at Goldman Sachs or traditional FDIC insured bank accounts and it's a risk I am willing to take. By default, BlockFi issues GUSD as their stablecoin of choice, but Gemini (GUSD) market cap is only $145m, whereas USDC market cap is 22 with a B billion. Ultimately, I always swap all my crypto "cash reserves" from the default Gemini GUSD to USDC. I stay away from Tether completely as it has a shaky past and unknown ties with China and exchanges.

dharma1 5y ago
Why do you prefer USDC to GUSD? They both seem to be 1:1 backed centralised stablecoins, just the Winklebros version hasn’t taken off the same way
fyzix 5y ago
The SP500 has an avg of 13% return over the last 10 years and is considerably safer.
staticman2 5y ago
I don't see the appeal over trying to get 8.6% return in an index fund. The index fund can crash for up to 5 years but will almost certainly bounce back within 5 years time. The Blockfi thing can lose your money and never bounce back.
peteretep 5y ago
> but compare that to 0.5% earned at Goldman Sachs or traditional FDIC insured bank accounts Why on earth would you compare it to those rather than an index tracker?
- Clewza313 5y ago
  Because the increase in a share's value is tied to a company's profits and losses, while the increase in a cryptocurrency's value is tied to hot air and memes (exhibit A: Dogecoin).
- G3rn0ti 5y ago
  Because an index tracker exposes you to the risk of falling indices. Using a solid stable coin (DAI) and earning yield using an established lending platform (Compound or AAVE) or liquidity pool (Curve) does not. However, these new financial tools of course have other inherent risks but they are probably smaller than exposing oneself to the wildly fluctuating Bitcoin price.
  - peteretep 5y ago
    > a solid stable coin … established lending platform I think we are probably eons apart on the meanings of the words “solid”, “stable”, and “established” here.
schemescape 5y ago
It doesn't make sense to compare risk-free FDIC-insured deposits to stablecoins at BlockFi. Full disclosure: I did not find BlockFi's brief descriptions of their risk management strategies to be comforting.
- menzoic 5y ago
  What didn't you like about the risk management strategies?
  - tonfa 5y ago
    It's all highly leveraged on all sides, margin calls will amplify things if things start crashing (which will then risk not covering the initial investment, trigger a run, and amplify further).
  - schemescape 5y ago
    I probably should have left that part out of my original comment, since it was just my personal opinion and not relevant to the point I was making (risk-free rate vs. non-risk-free rate).
droffel 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? 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
skohan 5y ago
Don't you find it suspicious that BlockFi can offer such an incredible yield?
zapdrive 5y ago
Have you looked into decentralised alternatives like aave? I tried using blockfi, nexo and celcius. All three made withdrawing such a hassle. Repeat identity verification, mandatory 24 hour waiting period etc. I got fed up and turned to aave.

dharma1 5y ago

Why do you prefer USDC to GUSD? They both seem to be 1:1 backed centralised stablecoins, just the Winklebros version hasn’t taken off the same way

fyzix 5y ago

The SP500 has an avg of 13% return over the last 10 years and is considerably safer.

staticman2 5y ago

I don't see the appeal over trying to get 8.6% return in an index fund. The index fund can crash for up to 5 years but will almost certainly bounce back within 5 years time. The Blockfi thing can lose your money and never bounce back.

peteretep 5y ago

> but compare that to 0.5% earned at Goldman Sachs or traditional FDIC insured bank accounts Why on earth would you compare it to those rather than an index tracker?

Clewza313 5y ago
Because the increase in a share's value is tied to a company's profits and losses, while the increase in a cryptocurrency's value is tied to hot air and memes (exhibit A: Dogecoin).
G3rn0ti 5y ago
Because an index tracker exposes you to the risk of falling indices. Using a solid stable coin (DAI) and earning yield using an established lending platform (Compound or AAVE) or liquidity pool (Curve) does not. However, these new financial tools of course have other inherent risks but they are probably smaller than exposing oneself to the wildly fluctuating Bitcoin price.
- peteretep 5y ago
  > a solid stable coin … established lending platform I think we are probably eons apart on the meanings of the words “solid”, “stable”, and “established” here.

schemescape 5y ago

It doesn't make sense to compare risk-free FDIC-insured deposits to stablecoins at BlockFi. Full disclosure: I did not find BlockFi's brief descriptions of their risk management strategies to be comforting.

menzoic 5y ago
What didn't you like about the risk management strategies?
- tonfa 5y ago
  It's all highly leveraged on all sides, margin calls will amplify things if things start crashing (which will then risk not covering the initial investment, trigger a run, and amplify further).
- schemescape 5y ago
  I probably should have left that part out of my original comment, since it was just my personal opinion and not relevant to the point I was making (risk-free rate vs. non-risk-free rate).

droffel 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? 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

skohan 5y ago

Don't you find it suspicious that BlockFi can offer such an incredible yield?

zapdrive 5y ago

Have you looked into decentralised alternatives like aave? I tried using blockfi, nexo and celcius. All three made withdrawing such a hassle. Repeat identity verification, mandatory 24 hour waiting period etc. I got fed up and turned to aave.