CEFI = Centralised Finance. Some people balk at the idea of sending your crypto to centralised financial platforms (which are somewhat like banks, so you transfer your crypto assets for someone to "manage"/"hold" on your behalf.
Obviously not financial advice - Cefi was easier for me to dip my toes and pick up the various terminologies in crypto before I went over to defi (decentralised finance). This article is geared towards newbies in crypto; if you're already a seasoned user, you may skip this article.
Below are the 2 lending platforms - Celsius and Nexo - that I'm personally using (well, nothing beats having skin in the game right?).
What are lending platforms?
Think of them like fixed deposit accounts, but not at those decimal points interest rates. Holding USD-pegged crypto grants you upwards of 8% currently. What?! You may be wondering how can they pay such a high interest. The platforms are using your crypto to lend out loans themselves at higher rates, or you know, other investments that can earn higher than this to cover the interest payments (I mean, they wouldn't be here if they can't make a profit).
So, what are the rates like?
Assuming a typical portfolio without any member tiers (i.e. choosing to earn in-kind), a less volatile pathway would be to buy stablecoins (AKA USD-pegged crypto). Some of the bigger (in terms of market capitalisation) stablecoins are Tether (USDT), USDC and DAI. Tip: for those who are using Gemini platform to change your real-cash (otherwise known as fiat) into crypto, you can use their native stablecoin GUSD, which Celsius does accept as a stablecoin.
Stablecoin rates:
- Celsius: 8.88%
- Nexo: 8% (this differs from the 10% you see on the website because they disclosed the rate you will get as the highest tier member - how convenient)
Wait a minute, where's bitcoin? For those who know crypto as bitcoin only, do note that this is a volatile asset. You have probably heard of it's amazing rise to USD62k, but don't forget that it once dropped to ~USD30k this year as well - this translate to about 50% loss in capital if you didn't buy at the "right time". Hence, the above stablecoin portfolio is catered for those who would like to ensure that their capital doesn't fluctuate much, which also means you are capping your upside as USD wouldn't have any crazy appreciation (which I must concede here that if you hold Bitcoin, who knows?). Having said that, these 2 platforms do offer bitcoin as well, so it's your choice.
Points to note:
- Any geo-restrictions (some areas are excluded, please do your own research to ensure that their services are made available in your country)?
- Any deposit fee? (Both Celsius and Nexo don't charge a deposit fee currently)
- Any withdrawal fee? (Celsius: free VS Nexo: 1 free withdrawal a month, depending on member tier)
- Any member tiers? (Both Celsius and Nexo has them, rewarding you for holding a higher proportion of their native/own tokens)
- When is interest being paid? (Celsius: weekly VS Nexo: depending on whether you go for flexi or fixed term)
- Are interest earned in-kind (i.e. same as what you deposit) or in other cryptocurrency? (Both offers you the choice; granted, native tokens earn a higher interest rate to incentivise users to go for their native tokens)
- What kind of cryptocurrencies do they offer interest on? (It's limited! So please do check to ensure that they offer it)
8% is great! Are there risks?
YES. Deposits ain't guaranteed by anyone or any institutions. Platforms are subject to platform risk (i.e. poor management and run out of cash, or shut down and run away with your money, or getting hacked etc.), assets are subject to risk as well (if the stablecoins lose their peg, you lose your value). All in all, you will have to do your own research and assess if it's a risk you're willing to take for this higher interest. These are not financial advice.
Enjoy your crypto journey!
Referrals for your consideration, if you would like to gain some bonus crypto (and if you find that my article did help you. Full disclosure - I'll get some crypto for being a referrer):
Crypto lending: Celsius
https://celsiusnetwork.app.link/1153361c4a
$50 (paid in BTC) for holding $400 worth of crypto (1 transaction) for 30 days (that's 12.5% gain in a month)
This can be stacked with other promo codes, do look out in their Twitter account as they change up the promo codes frequently
Crypto lending: Nexo
https://nexo.io/ref/fooyq5fnda?src=android-link
$10 (paid in BTC) for transferring and holding $100 worth of crypto (1 transaction) for 30 days (that's 10% gain in a month)
