Ponzi!

The lender works like a traditional bank by accepting user deposits, paying interest on them and making loans in cryptocurrencies.

An advert on its website this morning promised 18pc returns on investment, spread through a variety of token trading instruments.

You might be able to earn 18% trading, arbing crypto. I would insist you can’t make that consistently by lending it.

17 thoughts on “Ponzi!”

  1. Its Warren Buffett’s old axiom – you only find out who has been swimming naked when the tide goes out. And its receding fast at the moment…..

  2. If they’re taking deposits in sterling and making loans in crypto, they’re probably factoring in an exchange gain as well as interest.

    Which makes it a very different risk profile to “traditional bank” lending.

  3. Incidentally, “lending” crypto is presumably leveraged “investment” in crypto. That has to be a special & rarefied sort of mug.

  4. But, but… crypto was supposed to be a safeguard against fiat money debasement and inflation. So if bitcoin has tanked our troubles must be over, right?

  5. Imagine fake internet money beloved by fat nerds with strong opinions on the age of consent being a scam tho.

    Can’t trust anybody these days.

  6. Interest rates on crypto are largely driven by short demand – I can imagine people paying big rates to borrow for shorting right now.

  7. Dennis, CPA to the Gods

    Several years ago a client came to me and asked my opinion on whether crypto was a good investment. I told him I wasn’t qualified to give investment advice, and I knew nothing about crypto. I then asked him to explain it to me. He couldn’t, at which point I told my client he’d answered his own question.

    As a CPA, I know a fool who will be parted from his money with little more than a glance; they’ve got the pure white light of greed and stupidity in their eyes and nothing will make it go away. That’s what I see in the crypto kids… much grief coming their way sooner rather than later.

  8. Dennis – it’s complicated but basically… Blockchain, Cloud, Internet of Things… The Future.

    That’s why I’m gonna need $20,000 for this jpeg of a monkey riding a bicycle.

  9. @Dennis
    How can any currency be an investment? It can only be speculation on exchange rates.

  10. Dennis, Clear-Eyed As Always

    Steve –

    I’ll give you $30,000 if you’ll take a check.

    BIS –

    The client wanted advice on cryptos as an investment. And I don’t give investment advice to clients… or anyone else. Whether he was looking to invest or speculate isn’t the issue. The issue is that he had no idea what crypto actually is.

    Being conservative by nature, the idea of buying something without any inherent value that is not backed by a government and trading on unregulated markets seems to be begging for a bad experience. But that’s just me.

    Every few years something pops up that is gonna make ya rich. 20 years ago it was day trading. Remember that? Then it was flipping houses. Remember that? Now it’s buying crypto. And it’ll end up that same way day trading and house flipping did… with a few folks making money and a whole lot of other people losing money.

  11. ” ..with a few folks making money and a whole lot of other people losing money.”
    Has to be. It’s a zero sum game.
    If you’d a mug client who wanted to invest in crypto, couldn’t you have put him onto something better? Sold him a bridge?

  12. In order to short a stock you first have to borrow the shares. I have seen borrow rates for particularly hard to borrow stocks reach 50%-annualized (the vernacular is the stock has “gone special”)

    Similarly you have to borrow crypto from somebody in order to short it. If you’re doing it with futures and claim you don’t have to borrow anything, well then the forward price that you get to short it at has an implicit interest rate built into it (the forward fx points are negative compared to spot). If you short crypto, either you are borrowing crypto, or somebody, somewhere, is borrowing crypto on your behalf.

    And I can easily imagine circumstances where the borrow to short crypto is 18%

  13. “That’s why I’m gonna need $20,000 for this jpeg of a monkey riding a bicycle.”

    Thats the ludicrous thing, you aren’t even buying the jpeg of a monkey riding a bicycle. When you buy an NFT you aren’t buying the piece of artwork its based on. You don’t own the copyright. All you own is a piece of code on the Etherium blockchain that directs you to a digital copy of the picture somewhere on the internet.

    This youtube video explains it pretty well:

    https://www.youtube.com/watch?v=IZaTd0hDtkI

    The best analogy seems to be you are buying a sort of artist endorsed copy, a signed photo if you will, of a piece of art. Admittedly a signed copy where the artist can never sign another one. A one off signed copy. Which might have some value – would a one-off copy of the Mona Lisa signed by Leonardo have some value? But its value entirely lies in the value of the underlying piece of art, so for NFTs of cycling monkeys probably not so much value…….

  14. Dennis, CPA to the Gods

    If you’d a mug/client who wanted to invest in crypto, couldn’t you have put him onto something better? Sold him a bridge?

    I can’t think of a faster way to lose a client. If they take your advice and make money, they’re a genius. If they take your advice and lose money, you’re a moron. It’s the nature of the beast.

    What I normally tell folks is to either aggressively pay down their debt and/or invest in mutual funds (pay someone else to worry about you making money).

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