This blog covers the general topic of financial markets.

Unrepressed Yields: 12% USDC, 8% PAXG, 6% BTC

first posted: 2021-03-21 13:31:48.787238

For all the talks about Defi, it appears that "centralised finance" platforms are offering very high returns in "hard tokens". They guarantee a high annualized yield paid daily or weekly.

High Rewards for Hodling on Centralised Platform

Here are a few platforms:

  • BlockFI (US, wire through silverbank/swift) pays 6% on first 2.5btc, 3% beyond, 5% on paxg, and 8.6% on stablecoin
  • Youhodler (Cyprus), pays 4% on btc, 8% on paxg, 12% on stablecoin
  • Nexo pays 4%-5% on btc, 8% - 10% on usdc, +2% (the larger number if you hold 10% of your aum in their altcoin) +2% is paid in Nexo
  • Celsius pays 4% on btc, 10% on stablecoin, 25% more if you hodl 20% of your aum in their altcoin cel
  • Aave

While liquidity is daily in theory, some users of those platforms have complained that "compliance check" slow down withdrawal by weeks.

Caveat: not your key, not your coins.

How are such high rates possible?

Someone on internet that I have reason to believe is knowledgeable on crypto told me that he thinks that these platforms are definitely not a scam. Here are the explanations for such high current yields.

Liquidity on these platforms is overnight, so the platforms could reduce their rates and depositors could withdraw if they feel remuneration is too low.

Crypto: BTC, ETH

Depositing BTC allows those platforms to lend BTC. Blockfi try to get lots of smaller (>2.5 btc) deposits rather than whales deposits that could go away overnight.

According to these platform's executives, they lend to institutional borrowers who do not go naked short on Bitcoin, instead, the lending allows to go short on one exchange and long on another, those allowing cross-exchange arbitrage.

Greyscale BTC Trust was another example of how such an arbitrage was possible.

Stablecoins: TUSD, USDC, USDG

Here, the executive explanation was less transparent, it seems that platforms are happy to pay 8%-12% on illimited fiat stablecoins.

The reason for that is probably shorts fiat long bitcoin speculators who are ready to pay high rates on margin loans.

Goldcoin: PAXG

This coin pays 5%-8% it looks that it is between stablecoin and crypto remuneration.

The reason being not explained, I suppose that it is less volatile than crypto and therefore can be lent at higher leverage, allowing higher returns.

Info on blockfi:

Info on on Celsius:

  • AUM 2.2bn in Nov 2020 source
  • Israel dev, compatible with US and non US hodlers, funded by ICO altcoin CEL
  • Celsians: Ask Anything
  • Celsius deposit rates with 40% bonus for receiving celsius interest
  • 25% bonus for platinum celsius holder
  • according to rates published by Celsius, you can get up to 18% rate on fiat if paid in CEL and holding 25% CEL, this means you can compound at around 14.7%, but the rate differential is such that you end up almost never converting any of your stablecoin into CEL. However on the app, the rate appears to be 10% whether paid in CEL or in stablecoin.
  • CEL chart

Despite the 18% headline rate, we see that the lower rate of return on CEL results in compound rates that differ only 0.4% and force the loyal followers to remain invested in the altcoin:

basic tierplatinum tiergold tiersilver tierbronze tier
weight 75%25%100%85%15%100%90%10%100%95%5%100%

The compound rate boost is more significant for BTC, as the rate differential with CEL is smaller and holding CEL ass much of a drag on the portfolio average compound rate.

Info on Nexo:

  • ICO with altcoin Nexo
  • Swiss (? jurisdiction)
  • 5bn in AUM
  • Nexo deposit rates (8%, 10% if interest paid in Nexo, requires hold 10% stake to get 2% extra to 12%, also, Nexo pays currently around 2% dividends)
  • Nexo chart

Info on youhodler: