4 ms·

There are definitely ponzi schemes in defi, but I'm not sure celsius is one just because they pay what seem on face to be impossible rates. Gemini, which is reg

by _6hmp 5y ago

There are definitely ponzi schemes in defi, but I'm not sure celsius is one just because they pay what seem on face to be impossible rates. Gemini, which is regulated and based out of NYC, offers 8% on GUSD, their USD stablecoin. My understanding is returns on this come from a huge demand for crypto lending from institutions participating in the "basis trade", and a limited supply of USD lending available to them for it due to custodianship and regulator issues with cryptocurrencies. https://www.bloomberg.com/news/articles/2021-03-27/crypto-shadow-banking-explained-and-why-12-yields-are-common https://www.bloomberg.com/news/articles/2021-03-27/crypto-sh...

reducesuffering 5y ago
My understanding is that the bond market is highly efficient and there is no free lunch. An interest bearing security yielding 8% is a junk bond in today's territory because risk free rate is 0%, and stable corp bonds like Apples are like 1%. 8% is like the price of Argentinian bonds, meaning there is a relatively high chance of default to incentivize capital there compared to the safe 0-1%. Default meaning, the Gemini coin will be worthless when you try to withdraw. You could try to ride 8% junk bonds for 3-24 months too.
- _6hmp 5y ago
  Yes definitely it could be because of risk. There is also a risk that the GUSD isn't returned (with Gemini it's not actually defi, there is no smart contract mandating its return, there is counterparty risk). I'm not saying it's 8% risk free when the risk free rate is 0%. But the article indicates that there is an actual inefficiency here due to institutional restrictions on cryptocurrencies and an institutional demand for products that approximate them.
janmo 5y ago
They claim to make 20-40% APY risk free. Just LMAO right now. There is no such thing as 20-40% APY risk free, if you think you can get such returns risk free you must be a total fool. I am unsure how they are doing it but I presume they are using a technique similar to the "Arbitrage in Dual Classes" for stocks. Basically you bet that the price of the class A and the class B of a stock will eventually merge to the same or a very similar price. In this case I think they do this with the BTC spot and future price. This technique worked well for stocks until 2008 when they all got REKT in the Volkswagen Class A stock short squeeze and lost everything. One guy went from billionaire to broke within one day and jumped in front of a train... I have the sad feeling this is going to happen again. As a bonus, Celsius also claims to do Rehypothecation, the thing that caused the subprime crisis. Have fun "unbanking" yourselves.
- _6hmp 5y ago
  I'm not involved in this personally.

by _6hmp 5y ago

reducesuffering 5y ago

My understanding is that the bond market is highly efficient and there is no free lunch. An interest bearing security yielding 8% is a junk bond in today's territory because risk free rate is 0%, and stable corp bonds like Apples are like 1%. 8% is like the price of Argentinian bonds, meaning there is a relatively high chance of default to incentivize capital there compared to the safe 0-1%. Default meaning, the Gemini coin will be worthless when you try to withdraw. You could try to ride 8% junk bonds for 3-24 months too.

_6hmp 5y ago
Yes definitely it could be because of risk. There is also a risk that the GUSD isn't returned (with Gemini it's not actually defi, there is no smart contract mandating its return, there is counterparty risk). I'm not saying it's 8% risk free when the risk free rate is 0%. But the article indicates that there is an actual inefficiency here due to institutional restrictions on cryptocurrencies and an institutional demand for products that approximate them.

janmo 5y ago

They claim to make 20-40% APY risk free. Just LMAO right now. There is no such thing as 20-40% APY risk free, if you think you can get such returns risk free you must be a total fool. I am unsure how they are doing it but I presume they are using a technique similar to the "Arbitrage in Dual Classes" for stocks. Basically you bet that the price of the class A and the class B of a stock will eventually merge to the same or a very similar price. In this case I think they do this with the BTC spot and future price. This technique worked well for stocks until 2008 when they all got REKT in the Volkswagen Class A stock short squeeze and lost everything. One guy went from billionaire to broke within one day and jumped in front of a train... I have the sad feeling this is going to happen again. As a bonus, Celsius also claims to do Rehypothecation, the thing that caused the subprime crisis. Have fun "unbanking" yourselves.

_6hmp 5y ago
I'm not involved in this personally.