8% Per Annum on USD in Binance.com - Worth it?

jumperabv3

I am following the faucets that I mentioned in this forum before, and one of them posted on their Twitter this article today:
https://freebitcoin.io/articles/get-8-percent-on-usd
In short Binance is an exchange platform for Crypto, quite well known for Crypto users. They are not the first ones to offer interest rates on Crypto loans, BlockFi does the same, and there are other big players who do that, but Binance is much more solid in comparison to others because it has more transparency.

Anyway, long story short - you can buy a stablecoin of the USD currency and invest it in Binance for 8% return per annum, rate can be guranteed for max 90 days, after 90 days it can change up or down but it's likely to stay high. That's the gist of it.
You basically lend your money to Binance who lends your money as a secured loan to a Crypto user who needs extra cash in Crypto, likely for trading purposes. The loan is secured against Crypto assets the user has so there is no way for the borrower to cheat the system and run away with the loan because if he does he would lose the Crypto assets that are used as collateral against that loan.

Honestly, it sounds quite simple and it seems to be a trend in the Crypto world for investors to get high yields on their Crypto assets. My question is if you would invest in something like this? What's your opinion about this?

John_

When the company pay you neither the interest or your principal back, what’s your route for recovering it?

jumperabv3

John_ said:

When the company pay you neither the interest or your principal back, what’s your route for recovering it?

You mean what happens if Binance collapses? That's a risk you have to take, they are today bigger than many local banks in your area, so the chances of them collapsing are quite slim, and most of their Crypto funds are stored in cold wallets so they are quite safe.
Lehman Brothers collapsed because people couldn't pay their mortgages with high rates back then in 2008, here with Binance the Crypto is an actual asset, what users deposit in Binance comes from real money and not something printed or some digits in the computer, but still - anything is possible, so this is your own risk to take.

Indeed if you google search about where to store your Crypto then many would say that using exchanges is not the best option out there, but your problem is that storing your Crypto in a cold wallet won't yield you any interest neither. World Economy and Crypto are all based on trust, so when you choose a product like this you should use a company that is trusted by millions and not some small Crypto website that could offer you 20% on your Crypto. Also BitcoinTalk is a great place for further advice on this.

As for "company doesn't pay your principal back" you need to realize the funds are available to be withdrawn immediately at any given moment, the funds are yours and Binance is treating your funds like this. At any given moment you can cancel the fixed deposit and you can withdraw your funds immediately, Binance doesn't commit you to any term at all, you have 100% flexibility with this product which is why I personally like it.

Compare it with BlockFi - I tried saving with them once, it took them 4 days to process my withdrawal request. It's okay and it's not bad but there is no comparison to the instantaneous options that Binance is offering with their products. 

jumperabv3

John_ said:

When the company pay you neither the interest or your principal back, what’s your route for recovering it?

Another thing I'd like to mention.
My "route" is to stay vigilant and if I suspect any issues I'd withdraw my coins immediately and wait for the storm to pass. The time it takes to withdraw from Binance is less than 15 minutes in total, usually much faster than it... so if at some point let's say during Christmas 2020 you would be worried about the Crypto world for any reason whatsoever - click with your mouse, it takes 10-15 minutes to see your Crypto back in your own cold wallet that is 100% in your control.

Also, I don't have the capacity and I wouldn't save thousands of thousands here but.... perhaps this is a scenario I'm thinking of taking:
$50,000 to save long term yields 8% --> around $11 per day ($330/month).
Won't be rich from it but it could be a nice long term investment. It might not also stay 8% all the times but I definitely see this stays above 5% for the short-medium term.

John_

No, that’s not what I asked.

You seem to have it all worked out though. If it’s as safe as you claim then remortgage one of your homes, and stick all the capital that you can raise in it.

jumperabv3

John_ said:

No, that’s not what I asked.

You seem to have it all worked out though. If it’s as safe as you claim then remortgage one of your homes, and stick all the capital that you can raise in it.

I've already remortgaged one property and invested in Reading, I still think Real Estate is far better than Crypto for now, also I don't like the US Dollar* as a base currency too much, with the US elections coming up and Trump not really doing his best against COVID19 - ugh ... not too sure how much I like the US Dollar as a base currency but right now there is no savings for the Stablecoins of the GBP or EUR, they are available in Binance but without any savings options.

And as mentioned I won't invest more than $50k on this, thankfully don't need to remortgage in order to invest in this, I'm just slowly adding some funds aside into this, it gains interest as promised but it's stuck with the US Dollar, and I'm not a huge fan of the way America is handling itself with this pandemic but the dollar is here to stay I assume at least for a few more centuries.

Note:
*If you remortgage your house you get cash in GBP, you have to exchange it to USD in Crypto so you take a risk against the GBP which I believe would rise against the USD, so it's not a great advice. Only invest what you're happy to invest.

John_

No, you don’t need to take any currency risk.

You seem to not really be up to speed on the basics here, you’ve not got a good handle on FX, or on now defaults work, yet seem to feel that you are expert enough to be trading in some unusual asset classes. If you don’t want to take advice here, then why ask the questions?

TOP_CAT

I would suggest the post is about spamming Binance and nothing other than that .

jumperabv3

TOP_CAT said:

I would suggest the post is about spamming Binance and nothing other than that .

Maybe this explains it differently without mentioning that word?
https://finance.yahoo.com/news/crypto-lending-worth-risk-080014132.html

Voyager2002

The interest rate is comparable to what you could earn from peer-to-peer lending, although as described in the OP it sounds more like mini-bonds

The whole process is rather more opaque than using a good P2P platform, so you have to trust that the ultimate borrower really does have the assets in a "cold wallet".

Of course the other big risk is the volatility of Bitcoin versus the pound sterling.

tonycottee

jumperabv3 said:

John_ said:

When the company pay you neither the interest or your principal back, what’s your route for recovering it?

Another thing I'd like to mention.
My "route" is to stay vigilant and if I suspect any issues I'd withdraw my coins immediately and wait for the storm to pass. The time it takes to withdraw from Binance is less than 15 minutes in total, usually much faster than it... so if at some point let's say during Christmas 2020 you would be worried about the Crypto world for any reason whatsoever - click with your mouse, it takes 10-15 minutes to see your Crypto back in your own cold wallet that is 100% in your control.

Also, I don't have the capacity and I wouldn't save thousands of thousands here but.... perhaps this is a scenario I'm thinking of taking:
$50,000 to save long term yields 8% --> around $11 per day ($330/month).
Won't be rich from it but it could be a nice long term investment. It might not also stay 8% all the times but I definitely see this stays above 5% for the short-medium term.

I reckon that by the time you 'feel' there is something up with the market, it will be too late. The average person on the street is always the last to know. Unless you have contacts?