The Lie That Is APY - Why I Opt For Bitcoin Interest
Hey Jessinvestors
The chase for yield is on with the popularity of DE-FI and all these staking coins; investors are now chasing interest rate returns instead of good old price pumps like the ICO phase. Cryptocurrencies are all trying to establish a yield curve to entice capital to their ecosystem.
When you can control your inflation, you can offer better returns; that's why we see all these shitcoins offering 1000s of percentage point returns for staking their coins.
The fact is, this is all a marketing gimmick; just like shitcoins captured people with the unit bias; they are now doing it with interest rate figure bias.
People are programmed to think that the higher the interest rate, the better the return, but this isn't actually the case. I've spoken about the fisher effect it comes to fiat currency, but the same rules apply for cryptocurrency.
I am not picking on anyone coin, but let's take a look at the inflation rates of the top 20
- Ethereum - 4.65% inflation
- XRP - 4.77%
- LTC - 3.85%
- Cardano - 20%
- Chainlink - 9.36%
- Theta - 14.88%
- Tezos - 8.8%
- Tron - 7.46
So in theory if you're taking or lending out any of these coins and getting a return less than the inflation rate, you're effectively getting diluted of purchasing power.
Yes this can be offset slightly by the growth in market cap in fiat terms, but all these currencies will eventually reach a point were the market cap cannot make up for the dilution.
Eventually this turns into a game of fiat where the highest stakers and lenders gain more of the purchasing power as the network is diluted.
Bitcoin is interest rate positive
The current Bitcoin inflation rate is around 1.78% per year, which means lower inflation rate than gold's average inflation, and we're on our way to the next halving, which would see that shrink even further to 0.89%.
Bitcoin interest rates with various lenders like BlockFi, Celsius Network, Luno, LEDN and Nexo range between 3.4% and 6.1%, which may seem low in an absolute numbers perspective, but it's actually really high if you consider the positive return you're getting.
If I am getting the low end of the interest rates available at 3.4% and I remove Bitcoins inflation rate of 1.78%, I am getting a 1.62% increase in my ownership of the Bitcoin network.
On the high end of the scale, I am getting a 4.32% return, but I am obviously taking on more risk to get that, so it's always important to hedge against these various platforms and not have too much of your Bitcoin further out the risk curve.
It's not about absolute numbers it's about percentage ownership of the network
Bitcoin is not about the amount of Bitcoin you have, or the price of Bitcoin you have but the percentage of the network you own. The market cap and the price I believe will continue to grow and while many focus on how much fiat they can extract out of the network for me I want to own as much of the hardest currency around.
I do not risk all my Bitcoin to gain interest, but an amount I am willing to risk. Each month or week I get an interest payment I get to compound that and when combining that positive return in interest plus the annual growth rate of the network, I cannot see a better turn around.
In fact it seems pointless to take on more risk than this, Bitcoin is the best investment of the last decade and it's to me, I cannot see anything that can compete with that in terms of risk adjusted returns.
Have your say
What do you good people of HIVE think?
So have at it, my Jessies! If you don't have something to comment, "I am a Jessie."
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Most of these DeFis, especially the Goose clones are going to 0 because the math doesn't check out. They're printing so much every day and no one is left to buy them given the number of clones out there.
Hopefully after the consolidation, things become more stable. Whether the switch to farm's model instead is going to make things more sustainable is questionable to me. I'm not convinced yet but let's see.
I’m not convinced either, I just see this as taking the fiat system and ramping it up to 1000.
All you do is divvy up the market cap every which way and burns are like tax to try abs take some out of circulation to keep it from hyperinflation to early
I don’t think people do the math; they just see high interest rate and higher USD value like a bunch of dollar junkies
Why would you be in crypto but you do obsessed with the dollar price of your coins? Then you’re not in crypto you just in digital fiat
I’m stoked every month when I see my interest in Satoshis and know I’m growing my ownership of the network and I can be confident in getting more because it’s mathematically proven
Oh dear. That doesn't bode well for me then. My little 0.001 buys are going to take a long while even to get to 1 bitcoin.
I feel better about not having gotten around to buying other coins yet though. Especially Cardano, which has crossed my mind.
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It takes a while and it’s about being consistent the vast majority of people will never own 1 BTC especially the shitcoiners as they’ll come in last and have to pay the most lol
If we had to share BTC equally amounting the population I think it’s something like 0.028 so you’re not too far off being a 1 precenter
The thing is as BTC grows the Units will just add more zeros to the end so your purchasing power remains in tact as well as your place on the network unlike fiat and these other coins
Are you saying that anyone with 0.028 bitcoin is a 1 percenter?
What? Not feeling very bright this morning. 😂
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No I’m saying anyone with more than that is technically a 1 percenter in Bitcoin terms
Okay so as Bitcoins price rises let’s say the Satoshi 0.00000001 is too valuable and we need smaller units called milli Satoshis we can add it to the network and people can use that subdivision to transact and make it easier to use
Which doesn’t affect your amount on chain where as with something like fiat or Shitcoins they just create new units and dilute the rest of the holders
Ah. I see. Thanks for the extra explanation. 😊
!ENGAGE 30
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ENGAGEtokens.How dare you.
My APY of 127847329849238742398742% I am getting and similar is totally legit. You just have to compound , your house, car, every other crypto you own and forget what the original number was and accept the new one is 10%.
That is just the market, if you were a 1337 crypto person you would know.
Best part is when you get to dump you have to sell into reduced buying power so you destroy the unit price and never realise your absolute return lol it’s hilarious
You gustapo? Whose selling, huh, you working for them? Diamond hands bitch.
Lol getting rich on paper does feel good I’ll give you that
!LUV
haha I also got !LUV, think I pumped the price a bit by just buying a 100 a day or so ago lol. I guess I should test these bots out more, then it is Pennies4U and me
Command accepted!
What did I tell you about replying to me?
@chekohler, you were given LUV from @penderis. Info: https://peakd.com/@luvshares or check wallet: https://hive-engine.com
Pennies Dropped
@penderis, you were given LUV from @chekohler. Info: https://peakd.com/@luvshares or check wallet: https://hive-engine.com
It’s all about numbers and they know that people love big numbers. It’s all about knowing how to manipulate them to lure more people.
If you know the right number and do the calculation (considering the risk factor) you know even a slight less % is better than a big %.
Lol indeed people just know higher numbers are better until they find out that higher numbers reach a point where it's hyperinflation.
Cryptos rug pulls and exit scams are just extracting the value same way fiat does it’s not better in fact it’s worse
These gimmicks with numbers are going to become more obvious as Bitcoin continues to run on its trajectory it will expose these poor monetary policies
totally interesting, i read up on lending and borrowing with aave today - but decided against it because there can always be bugs. i think lending and borrowing is more risky than buying these coins. but putting the return in comparison to inflation is something i haven't heard of before. very interesting train of thought.
The entire point of lending is to be able to beat inflation and get a return on your capital. But all these protocols are relying on the interest rate return being covered by new demand pushing the market cap higher
So your interest rate is based on perpetual growth of that market cap which is impossible no market cap can grow forever so these interest rates aren’t stable and as the market cap reverts your only dividing the market cap by the new inflation and not actually getting a return
that's right. so far i've only referred to fiat currencies in terms of beating returns, but of course it's the same with crypto... it just never occurred to me before lol
Well I’m glad I’m giving you something to think about and I’m not just the crazy boomer coin Bitcoin holder who doesn’t see value in other coins!
In just demand better and so far Bitcoin is the best
haha no you are not a crazy boomer well you are crazy ;))) thats true
LOL I’m glad you realized that I am crazy, best you stay away I might jusy have you thinking crazy too
!LUV
@katrin-lux, you were given LUV from @chekohler. Info: https://peakd.com/@luvshares or check wallet: https://hive-engine.com
Interesting thoughts thanks for helping us think about this for a few minutes.
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Glad it got you thinking a bit about how you see the Crypto market it’s all I want with my posts for people take some sort of value away from it
Are you using that strategy? Personally I stay away from crypto loans since I don't really want to be margin called at some point.
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Yes I do lend my BTC out on CEFI platform like blockfi Luno and Celsius and then on DEFI woth HODLHODL
I have not made a big loan before only $500 to test it, I don’t see the need to take a loan yet but if I do I would make sure it’s well within my range for a 50% draw down
Ah ok. Are you paying attention to the prices before taking loans?
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Not really no, because even if you are margin called you still get that collateral back after paying off the loan and the interest rate on these loans are far cheaper than the tax you would otherwise pay by selling your Bitcoin