Gemini Earn(gemini.com)
gemini.com
Gemini Earn
https://www.gemini.com/earn
51 comments
Most entities borrowing are borrowing crypto as part of their trading operations. For example, I could borrow crypto to provide margin for my HFT market making strategies.
A very popular use is to do rate/basis arb. So I borrow a crypto at say 10% interest and then use that to sell a future or swap that has a rate higher than 10%. So borrow at 10%, short a future with a annualized percent basis of 20%, and capture a risk free spread of 10%.
Very sophisticated and institutional players are doing a lot of these kind of basis arb plays nowadays. It's pretty much free money. You need to be able to borrow though, as without leverage these rate arb strats don't yield compelling enough returns.
If you're a crypto trading firm and not making at least 100% annualized, you're fucking up. It's not usual for sophisticated players to be making a 1-2% return a day in crypto.
The wealth generation from crypto trading in the last two years is truly astonishing.
Also want to note is that most of these obscenely high return strategies are delta neutral: they are unaffected by the price of crypto going up or down. There are some funds out there who's returns are derived from crypto exposure, but those are the shitty ones.
A very popular use is to do rate/basis arb. So I borrow a crypto at say 10% interest and then use that to sell a future or swap that has a rate higher than 10%. So borrow at 10%, short a future with a annualized percent basis of 20%, and capture a risk free spread of 10%.
Very sophisticated and institutional players are doing a lot of these kind of basis arb plays nowadays. It's pretty much free money. You need to be able to borrow though, as without leverage these rate arb strats don't yield compelling enough returns.
If you're a crypto trading firm and not making at least 100% annualized, you're fucking up. It's not usual for sophisticated players to be making a 1-2% return a day in crypto.
The wealth generation from crypto trading in the last two years is truly astonishing.
Also want to note is that most of these obscenely high return strategies are delta neutral: they are unaffected by the price of crypto going up or down. There are some funds out there who's returns are derived from crypto exposure, but those are the shitty ones.
It is interesting to see crypto collectively become the things its supporters hated most about the traditional financial system.
Because cryptocurrency doesn't fix human corruption, sadly this seems to be a byproduct of currency, and industrialism among other things. All cryptocurrency does is give us a currency that removes centralisation.
Well there's defi, which is pretty exciting imo. There's a lot things in that ecosystem like flash loans (uncollateralized loans) that simply cannot exist in the traditional financial system. In many ways we are seeing a shift away from centralized exchanges towards decentralized, trustless transactions.
The promise of crypto is very much alive!
The promise of crypto is very much alive!
> With fiat interest rates at record lows, why not borrow fiat instead and use it to buy crypto?
I just had a look and compared Gemini's calculator of lending, compared to Zopa's (UK p2p lender) calculator and, for a £10k loan, you'd be paying ~£500 in interest at Zopa (~14% APR), where Gemini claims you'll be getting $1.7k in interest (based on $11k lent and Filecoin's ~7% interest).
My guess is Gemini's calculator is either purposefully or accidentally broken, or I'm missing something.
I just had a look and compared Gemini's calculator of lending, compared to Zopa's (UK p2p lender) calculator and, for a £10k loan, you'd be paying ~£500 in interest at Zopa (~14% APR), where Gemini claims you'll be getting $1.7k in interest (based on $11k lent and Filecoin's ~7% interest).
My guess is Gemini's calculator is either purposefully or accidentally broken, or I'm missing something.
Because nobody will lend you fiat to buy crypto? Interest rates for high-quality collateral (real estate, established business income, legalized theft of your citizens’ assets via taxation, etc.) are at record lows but credit cards for marginal borrowers still charge 20%+.
Am I missing something about crypto lending? Your deposit can't be FDIC insured and if borrowers are defaulting that means your deposit disappears. You can't bailout a crypto bank by printing crypto.
The appreciation of Bitcoin has been so staggering that it also makes getting interest back on your deposits seem rather outdated.
The appreciation of Bitcoin has been so staggering that it also makes getting interest back on your deposits seem rather outdated.
Bitcoin banks have been tried and failed, I should know the US department of Justice sent me victim notification emails about it for years.
Take it from someone who has operated in this space long enough to beware of interest rates on crypto, the money has to come from somewhere to cover the vig
Fractional reserve banking is the thing that is to be avoided and ultimately fails.
Ymmv. I am not a financial advisor blah blah
Take it from someone who has operated in this space long enough to beware of interest rates on crypto, the money has to come from somewhere to cover the vig
Fractional reserve banking is the thing that is to be avoided and ultimately fails.
Ymmv. I am not a financial advisor blah blah
You’re not. The ToS for Gemini Earn states exactly that you risk losing your deposit.
You earn interest on top of the underlying appreciation. Doesn’t seem outdated to me.
You earn interest on top of the underlying appreciation. Doesn’t seem outdated to me.
As with anything in crypto, there is significant counterparty risk.
This is just crypto p2p lending, which is hardly new. Fraud is rampant in this space.
it's not, this is either overcollateralized lending like compound finance or dharma, or it's flash lending. You don't have to worry about fraud.
edit: this line sheds some light: "Gemini is partnering with vetted and accredited third party institutional-grade borrowers including Genesis Capital". So they are lending your money to accredited parties, not random people on the internet.
edit: this line sheds some light: "Gemini is partnering with vetted and accredited third party institutional-grade borrowers including Genesis Capital". So they are lending your money to accredited parties, not random people on the internet.
Actual DeFi is great. It's non-custodial, on chain, and mostly easy to verify just by reading the code. Any Ethereum based asset makes this trivial to implement, and for the most part, the DeFi ecosystem on Ethereum is incredibly mature.
BTC lending on the other hand (which Gemini is offering) must be custodial, so there's pretty significant risk of loss if Gemini gets hacked, seized, or otherwise looted.
To answer someone else's question on this thread, over-collateralized lending solves the "I want to buy Ethereum but all I have is Ethereum" problem. Most people use it at a really simple mechanism for adjustable leverage, letting them increase their risk exposure without losing custody of their assets.
BTC lending on the other hand (which Gemini is offering) must be custodial, so there's pretty significant risk of loss if Gemini gets hacked, seized, or otherwise looted.
To answer someone else's question on this thread, over-collateralized lending solves the "I want to buy Ethereum but all I have is Ethereum" problem. Most people use it at a really simple mechanism for adjustable leverage, letting them increase their risk exposure without losing custody of their assets.
Probably better to call it “self-custodial” since you still have to maintain security of the keys yourself. But yeah, there’s no additional custodian required, unlike (say) publicly traded securities.
I guess they're just collecting a spread on the yield offered by Genesis then. Why not just go with Genesis directly?
Nobody said it was new. Gemini is announcing they are offering it.
Yet another loan originator for Genesis counterparties, now with half the interest payouts. What are the capitalization and/or insurance requirements? This is all extremely opaque. The main reason they’d borrow is to short it, which means they’ll sell it to cause a liquidity crash. If that doesn’t work, they’ll be bankrupt and you’ll lose everything anyway.
Can someone more familiar with these types of programs (whether Gemini's or another's) explain how these companies evaluate the trustworthiness of their borrowers?
Given that these loans appear to be unsecured, the last thing I would want is for Gemini to approve someone with my money and have them skip town, metaphorically speaking.
Given that these loans appear to be unsecured, the last thing I would want is for Gemini to approve someone with my money and have them skip town, metaphorically speaking.
[deleted]
Literally still waiting on verification from Gemini after more than 2 months. I've since opened an account with BlockFi (was verified in 24hrs) an account with Binance (same again) and bought crypo from binance and moved it to blockfi for interest gain. Gemini can suck a fat one.
I may have missed this on the page; is the interest paid in USD or in the asset you're lending? The examples only show USD.
It says interest compounds daily; keep in mind (US Residents) that every day is another line item you need to report to the IRS.
It says interest compounds daily; keep in mind (US Residents) that every day is another line item you need to report to the IRS.
The coins with staking rewards do not reward in USD. So no matter if you get paid in USD or the coin, its worth will depend on the exchange rate at the time of payout.
If I am earning interest on Bitcoin I put in there, am I also gaining/losing the value change of Bitcoin during that time?
Ok, you can, but I still don’t understand how.
“ Unlike other opportunities to earn interest on your cryptocurrency, you can redeem your cryptocurrency at any time, with no penalties, and receive it at its current market value — plus the interest you’ve earned!”
“ Unlike other opportunities to earn interest on your cryptocurrency, you can redeem your cryptocurrency at any time, with no penalties, and receive it at its current market value — plus the interest you’ve earned!”
[deleted]
PROGRAM RISKS
YOUR AVAILABLE DIGITAL ASSETS WILL LEAVE GEMINI'S CUSTODY, AND YOU ACCEPT THE RISK OF LOSS ASSOCIATED WITH LOAN TRANSACTIONS, UP TO AND INCLUDING TOTAL LOSS OF YOUR AVAILABLE DIGITAL ASSETS. Gemini is not a depository institution, and the Program does not offer a depository account. Participating in the Program may put your Digital Assets at risk. Loans made through the Program are unsecured. You have exposure to Borrower credit risk, and Borrowers are not required to post collateral to you or to Gemini. Transactions in Digital Assets may carry added risk compared to lending of other types of assets because transactions in cryptocurrency are in many cases irreversible. Funds may not be recoverable in the event of errors or fraudulent activity.
YOUR AVAILABLE DIGITAL ASSETS WILL LEAVE GEMINI'S CUSTODY, AND YOU ACCEPT THE RISK OF LOSS ASSOCIATED WITH LOAN TRANSACTIONS, UP TO AND INCLUDING TOTAL LOSS OF YOUR AVAILABLE DIGITAL ASSETS. Gemini is not a depository institution, and the Program does not offer a depository account. Participating in the Program may put your Digital Assets at risk. Loans made through the Program are unsecured. You have exposure to Borrower credit risk, and Borrowers are not required to post collateral to you or to Gemini. Transactions in Digital Assets may carry added risk compared to lending of other types of assets because transactions in cryptocurrency are in many cases irreversible. Funds may not be recoverable in the event of errors or fraudulent activity.
For anyone using similar programs for years, they are the exact same
Nexo
Blockfi
Crypto.com
And Celsius
All have the same inherent limitations for insurance coverage and clauses
At least the autonomous onchain services let you purchase smart contract insurance to reimburse community accepted unexpected behaviors like overflows.
Nexo
Blockfi
Crypto.com
And Celsius
All have the same inherent limitations for insurance coverage and clauses
At least the autonomous onchain services let you purchase smart contract insurance to reimburse community accepted unexpected behaviors like overflows.
Awesome! So I can get a 7% return and all I have to do is trust random strangers with ALL of my money.
Which is..exactly the same when compared to a bank, a brokerage account, or index fund.
A bank, brokerage account, or index fund would have FDIC or SIPC insurance coverage.
It does not protect if the asset invested in goes down in value.
FDIC is protection against the bank being insolvent.
SIPC does not protect customers against losses from the rise and fall in the market value of investments.
https://www.sipc.org/for-investors/what-sipc-protects
FDIC is protection against the bank being insolvent.
SIPC does not protect customers against losses from the rise and fall in the market value of investments.
https://www.sipc.org/for-investors/what-sipc-protects
There's no disagreement here. FDIC/SIPC protect against insolvency. The context of this discussion is borrower credit risk, i.e., the risk that the borrower becomes insolvent.
Bank accounts are FDIC insured up to $250,000 each.
If your broker lends out your stock to short sellers, it will always return your shares, even if the short seller gets margin called and doesn’t have the money to pay back their broker.
I’m not sure what you mean by “index fund”, but securities/stocks are protected by SIPC insurance, up to $500,000 per account. You will get your stocks back if a brokerage fails.
If your broker lends out your stock to short sellers, it will always return your shares, even if the short seller gets margin called and doesn’t have the money to pay back their broker.
I’m not sure what you mean by “index fund”, but securities/stocks are protected by SIPC insurance, up to $500,000 per account. You will get your stocks back if a brokerage fails.
A bank does not mean bank account, banks offer many different investment vehicles.
A savings or checking account is covered by FDIC. If your broker lends out your stock and can not recoup it, then you are also not protected by SIPC.
https://www.investopedia.com/terms/f/fractionalreservebankin...
A savings or checking account is covered by FDIC. If your broker lends out your stock and can not recoup it, then you are also not protected by SIPC.
https://www.investopedia.com/terms/f/fractionalreservebankin...
> If your broker lends out your stock and can not recoup it, then you are also not protected by SIPC
This is not true. The broker would be in default to you. If that literally pushed the broker under, SIPC would be there to pick up the pieces.
This is not true. The broker would be in default to you. If that literally pushed the broker under, SIPC would be there to pick up the pieces.
Except all of those are insured by the FDIC so there's almost no risk outside of market volatility.
Wrong.
It does not protect if the asset invested in goes down in value.
FDIC is protection against the bank being insolvent.
SIPC does not protect customers against losses from the rise and fall in the market value of investments.
https://www.sipc.org/for-investors/what-sipc-protects
It does not protect if the asset invested in goes down in value.
FDIC is protection against the bank being insolvent.
SIPC does not protect customers against losses from the rise and fall in the market value of investments.
https://www.sipc.org/for-investors/what-sipc-protects
Aren't most of those institutions bound by certain laws and insurance requirements?
Not for investments. For regular banking, checking and savings, yes. That's FDIC.
It does not protect if the asset invested in goes down in value.
FDIC is protection against the bank being insolvent.
SIPC does not protect customers against losses from the rise and fall in the market value of investments.
https://www.sipc.org/for-investors/what-sipc-protects
It does not protect if the asset invested in goes down in value.
FDIC is protection against the bank being insolvent.
SIPC does not protect customers against losses from the rise and fall in the market value of investments.
https://www.sipc.org/for-investors/what-sipc-protects
those institutions are not lending your money out in uncollateralized loans.
Yes they are, banks operate on fractional reserve. Banks do signature loans all the time. A popular one is known as a credit card.
https://www.investopedia.com/terms/f/fractionalreservebankin...
It does not protect if the asset invested in goes down in value.
FDIC is protection against the bank being insolvent.
SIPC does not protect customers against losses from the rise and fall in the market value of investments.
https://www.sipc.org/for-investors/what-sipc-protects
https://www.investopedia.com/terms/f/fractionalreservebankin...
It does not protect if the asset invested in goes down in value.
FDIC is protection against the bank being insolvent.
SIPC does not protect customers against losses from the rise and fall in the market value of investments.
https://www.sipc.org/for-investors/what-sipc-protects
[deleted]
Poor interest rates compared to other more established competitors like https://celsius.network/
This "established competitor" (which I have never heard of, but I'm not very up to date) has domain registered on 2020-06-08 ...
Many popular exchanges have been offering staking for years.
Many popular exchanges have been offering staking for years.
Unavailable past login as far as I can tell...
lykr0n(1)
With fiat interest rates at record lows, why not borrow fiat instead and use it to buy crypto? Surely not all of the demand is coming from the unbanked?
EDIT: My question was answered while I was typing it up :)
https://news.ycombinator.com/item?id=25996264