Industry Diehards Continue Lending Crypto Despite Falling Yields

Despite the collapse of crypto lending revenues in the current bear market, some investors are on the long run and not changing their strategy.

Outrageous annual returns of 25,000% are not unheard of for die-hard crypto investors making money through yield farming or token staking.

However, the current crypto winter has seen many of these yields evaporate, although exact amounts are difficult to pinpoint. It is unclear whether investors will get their crypto back from banks and industry-related platforms, which have been hit hard by the recent market decline.

But it also depends on whether the institutions involved in these problems are established players or experimental startups. A 55-year-old law enforcement officer, Craig Bowman, who is lending the USDC stablecoin, is confident that the token will keep its peg to the US dollar because Circle, the USDC issuer, is controlled and backed by guarantees.

The experienced trader even estimates that his investments can give him a return of 9%, which is still better than the 0.5% offered by a traditional bank.

Two basic ways to borrow and earn interest

Crop farming 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 entails giving the crypto institution a traditional cryptocurrency in exchange for a “governance token”, granting the holder the right to vote and a certain interest in the platform. The institution then borrows the primary cryptocurrency from the depositor for a fee.

The governance token can be sold on another crypto 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.

When struck, the number of coins placed improves the chance of being selected to secure a network from a 51% attack. To their horror, TerraUSD investors found that staked tokens could not be revoked.

Crypto Winter Bites DeFi Lending

New York-based Nhat Nguyen entered the lending-related space about eight months ago, through the Avalanche token he had loaned. When the market collapsed, she took a $2,000 loss, but continued to try to earn revenue by lending stablecoins.

After leaving Wall Street positions at JPMorgan and Goldman Sachs, Nguyen now works in a crypto firm and is confident that others will continue to grow despite the inevitable demise of some companies in the crypto world. In other words, this upheaval is not the end of everything.

However, others are not so optimistic. Lukas Levert, 25, who has invested $25,000 by lending various coins, says he is pulling out of the company amid constant sell-offs of investors’ digital assets.

It will come back when the market stabilizes again. Levert’s choice here shows how interconnected the ecosystem is.

Several events have penetrated deep into the recesses of decentralized finance. For example, the collapse of the TerraUSD stablecoin, the difficulties of the lender Celsius suspending withdrawals or the massive layoffs of Coinbase, BlockFi and BitPanda have all weakened the DeFi ecosystem.

The total value locked in decentralized protocols has fallen 60% since January to about $39 billion, according to DeFiPulse.


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