[droffel]

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.

[Animats]

BlockFi says they are lending at 4.5% and accepting deposits at 8.5%. What's wrong with this picture?

[MarkSweep]

It makes more sense if you look at these rates:

https://blockfi.com/rates/

To qualify to borrow at 4.5%, you have to have a loan to value ratio of 20%. If I understand correctly, that means you have to deposit 5x crypt than the value of the loan.

On the savings side, the rates vary. If you deposit BTC, you earn 5% for the first 0.5 coins, 2% for the next 19.5 coins, and 0.5% for the rest.

Since the loans are secured, if the value of bitcoin does not move too much they can cover defaults by liquidating the collateral. Given the volatility of crypto currencies though, I still assume they will blow up at some point in the future.

[Clewza313]

Let me get this straight: you can lend from BlockFi, deposit it straight back, and make a 4% profit?

[wcoenen]

> 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]

>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]

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]

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]

Given that the 8.6% return is contingent on those funds being loaned out to third parties in a manner that involves risk (like margin trading), I am highly skeptical of their ability to not lose your money on the timeline of a decade. The trustworthiness of Blockfi doesn't matter if they mess up and end up loaning money to someone who ends up unable to pay the bill - and the person on the hook if the borrower does not pay is the lender of the capital. Not Blockfi. Why do you think the interest rates are so juicy?

If it was as safe as you seem to think it is, why didn't they just pony up their own money? 8.6% is far above any standard investment vehicle at the moment. For a safe investment, it's free money!

[pavlov]

Wag, a mobile app for finding dog walkers, received $300M in VC funding. It failed.

“Holds Bitcoin” and “received a pile of loose VC money” are not the gold standard of reliability in a financial provider that promises stable returns on a no-risk investment.