My Opinion on the Current State of Bitcoin Lending
The Bitcoin and crypto markets move at a lightning pace. If you are out of the loop for just a single week, that is the equivalent of missing multiple months worth of news in other markets. But that is part of the reason why I find the crypto markets so fascinating. Each day is different and anything could happen. If you have been following my posts for any length of time, you will probably know that two of my largest passions are bitcoin and also earning a passive income. Lending out your bitcoin for a passive income used to be a strategy that was extremely easy to pull-off and receive great interest rates. As recent as early last year, it was still the norm to receive at least 6% interest up to around 2 bitcoin, and if you looked hard enough you could find even better rates. BlockFi was offering 6% on up to 2.5 Bitcoin, Celsius was offering 6.20%, and Ledn was offering 6.25%. You could just set your coins and leave them. It was a time that many took for granted.
As I'm sure you're well aware, that is no longer the case. Lending out your bitcoin for the best possible rate has become a task that is not so passive anymore. The interest rates have decreased drastically, and the tiers have become much lower too. This has made many people like myself, who was one of the biggest advocates for lending, to re-consider if it is still worth the risk of lending out my "treasured" bitcoin, for rewards that are becoming less and less. The situation is even more dire if you are American like I am. Many of the lending services such as BlockFi, Celsius, Nexo, Ledn and more have blocked Americans from depositing any additional funds to earn interest on. Unless they are accredited investors, which most people aren't. This means that Americans can only earn on what they already had deposited into their account before these rules took affect.
As the bitcoin lending environment has changed, I have also had to evolve with it. When I began my lending journey, I was a staunch advocate of BlockFi, but as time went on, their image was soured for me and I withdrew my funds. After BlockFi, I sent a portion of my funds to Celsius, and fell in love with the service. While I didn't like that they had their own token, I was a big fan of the higher rates, weekly payouts, and the quick fee-less withdrawals. Unfortunately, the market continued to evolve and Celsius would lower their tiers. In order for me to maximize my bitcoin earnings I decided to withdraw and use Ledn. This would last a few months. While using Ledn I was a big fan of it. They offered even higher rates than Celsius. Although payouts were only once a month and users had to pay their own transaction fees. A key note, all throughout this time I was using Nexo as well. I never considered service here as an earning opportunity. This was because I had taken out a loan here, and was only keeping extra collateral here to avoid liquidation. Also, because I wasn't locking up my coins or using the Nexo token, that meant I was only earning 4% on my bitcoin. The irony is that when I began lending that 4% rate seemed quite low, but now that is a rate that is better than many other services you can find out there. Also of note is that I have never used services like Hodlnaut, or Haru. After researching the services, I just didn't have enough confidence in the services to take the risk of my lending bitcoin with them.
So that means I have gone through nearly all of the bitcoin lending services, and have withdrawn my funds from nearly all of them as well. Because I'm an American, even if I wanted to begin earning again by depositing bitcoin on those services. I would currently be unable to until the regulation side of things are ironed out.
And so I have explored other opportunities.
I'm currently earning a large majority of my "passive" bitcoin income on the FTX US app, which formerly was Blockfolio. I have mentioned this previously in some of my crypto earnings articles. For you first $10,000 worth of crypto on the exchange, FTX pays out 8% interest on it. Far better than you can find nearly anywhere else. Because it is FTX, that also helps to give a little more confidence of the service sticking around, as they recently surpassed Coinbase in trading volume. For any crypto that you have on the exchange that exceeds $10k, they pay 5% on. Again, you'll be hard pressed to find anywhere that pays 5% on an unlimited amount of bitcoin, ETH or any other crypto. Another benefit is that withdrawals from the exchange are free for non ethereum coins. On my articles I never shill reference links, it is against my integrity. So all I will say is that I have had a good experience and you should check them out if you are interested. Please do your own research.
Aside from using FTX, I'm also looking into other avenues to earn with my bitcoin. Places such as KuCoin, and also potentially using Nexo more seriously.
The interesting thing about the bitcoin lending environment is how it was precursor to how the market would eventually perform. During the first quarter of last year, rates were normal and lending was a breeze. But in April, that is when rates began to drastically drop. Borrowing demand dropped, and these services had to drop their rates accordingly. And then in May bitcoin's price would top out at $64k and some would argue that the bear market began. In the future this might be an area to watch that could potentially predict how the market performs.
I think the real question that most people that are crypto lending advocates want to know is if rates will go back up in the future. Or are we destined to have rates similar to the rates you can find for savings accounts at banks?
My opinion is this. I think that the rates that were available the last year and before that, were the golden times for lending period. We may never reach those rates again. This is the main reason why I went so hard into lending bitcoin to take advantage of the rates while they were still available. But, I also don't think we will go to the near zero rates that you find at banks. My prediction is that rates will land somewhere in the middle. However, this is something that I would love to be wrong about.
With that said, I still continue to lend out my bitcoin, trying to accumulate as much bitcoin as possible while prices remain cheap. Always remember this key point. While the interest you are earning today may seem small, if bitcoin does a 5-10x in price, that number can quickly increase in dollar-terms.
How about you? What are your current opinions about the bitcoin lending landscape? Where do you lend your bitcoin?
As always, thank you for reading!
