Is the ratio of passive profitability of borrowed and pledged crypto funds changing?

In the past month, the price of Bitcoin has increased by 1.5 times. On the morning of August 23, the cost of the first cryptocurrency exceeded $50,000 for the first time since mid-May. Investors who bought bitcoin in May, June and July at a price of $30,000 each have already made nearly 67% of their profits. But buying cryptocurrency is not the only way to get income from digital assets.


Borrowing is a passive profit method involving the temporary transfer of cryptocurrency interest. Cryptocurrency investors either provide loans to exchanges (and therefore increase liquidity) or individuals. The transferred funds are frozen in the smart contract.

For example, in terms of transaction volume, Binance, the largest cryptocurrency exchange, has two types of loans:

  • Perpetual contract. Its interest rate is very low, but it can withdraw or add funds from this type of contract at any time;
  • Fixed contract. Usually set a specific time period (10 days, 15 days, 30 days, etc.). There are higher interest rates. The funds of this type of contract cannot be withdrawn before the end of its validity period.

Binance users can choose to use USDT stablecoins to invest in cryptocurrencies in perpetual contracts. The annual interest rate for this deposit is 1.2%. Higher interest rates-The annual interest rate of the Inch token perpetual contract is 3.3%.

The Axie Infinity Fixed Token Contract (AXS) provides 15% annual revenue. However, the funds invested in the contract will be unavailable for 14 days. On the BlockFI decentralized platform, USDT stablecoins can be borrowed permanently at an annual interest rate of 9.3%. The lending platform Celsius provides 5.3% of fixed contracts for Ethereum.


Staking is a passive profit method. Users store coins on the PoS algorithm to ensure the healthy operation of the blockchain. This gives the holder the right to profit. This option is only applicable to cryptocurrencies running on PoS platforms, such as EOS, Tezos, TRON and Cosmos.

The purpose of pledge is to ensure all operations on the blockchain and support for the network. Therefore, digital currency holders are rewarded. The more tokens a holder has, the more likely he is to become the creator of a new block.

The use of pledge depends on the investor’s strategy. According to him, if asset holders are willing to endure the pain of being unable to sell their assets for a long time, pledges will become an additional source of income.

“In the medium and long-term strategy, users can obtain additional funds by holding open positions, which looks very interesting in the context of traditional financial markets. This strategy turns the purchase of altcoins into a substitute for bonds, and Has accumulated coupon income.”

Pledge investment can bring 3% to 15% of income every year. Experts say that the most promising pledges are tokens whose exchange rate has an upward trend in the medium term. Otherwise, the additional tokens issued will not even be able to make up for the exchange rate difference. Therefore, the first thing that needs to be concerned is not the pledge ratio, but the stability of the token value growth trend.

The most interesting tokens are EOS (EOS), Stellar (XLM), Cardano ( ADA ), TRON (TRX) and Tezos (XTZ).

“Pledge can be called a mature substitute for bank deposits or bonds. This is a conservative tool that can reduce risk in some strategies.”

The risk depends on the choice of asset class and the type of fund freeze. For example, long-term locking of unstable altcoins with fixed locks will have the greatest risk, while holding stablecoins with flexible locks will have the greatest risk.

The pledge period of EOS on Binance Exchange is 30 days, 60 days and 90 days. The pledge return rates were 4.2%, 4.6% and 6.1%. Huobi Global, a crypto exchange, holds shares in TRON (TRX) at a price of 7% per year. Coinbase offers Cosmos (ATOM) pledge with an annual interest rate of 5%.

Crypto fund

How do crypto funds work?

Cryptocurrency funds can be compared with traditional exchange-traded funds, which are associated with specific economic sectors, but in this case, it is associated with the field of digital currencies.

These funds mainly buy Bitcoin and other potentially liquid cryptocurrencies. In this case, profit will depend on the growth of cryptocurrency quotes. In addition, these funds have flexibility in terms of cash to actively manage their positions in the cryptocurrency market. Once the purchased assets appreciate to a certain extent, they will be sold and investors will get the profits they deserve.

The prospects of crypto funds

Both short-term and long-term investments in cryptocurrency funds now seem reasonable. This is because in the short term, there will be a wave of institutions accepting Bitcoin in the financial system, which may push the price of Bitcoin up in the coming weeks and even months. When looking at the long-term, in the next 5 and 10 years, Bitcoin will be able to blow to higher highs and fewer and fewer deep corrections.

Potential risk

When investing in large cryptocurrency funds, all key risks are negotiated in advance, and investors can view their funds more calmly than buying digital currencies themselves. In large crypto funds, certain risk management policies will be provided, describing the level of risk capital (potential losses) and the level of balance that will be returned to investors.

Like all assets, cryptocurrencies will not only rise but also fall. Digital currencies are more like stocks than currencies, because in theory, they can be completely devalued. For example, bans by regulatory agencies in developed countries.

How to choose a crypto fund?

Choosing an encrypted fund must first study its reputation in the market and analyze its work history. One of the characteristics of fraudulent funds is the promise to guarantee high returns to investors.

It is necessary to cooperate with funds that hold stock market ETFs for a long time. The largest and longest-running funds are Pantera Capital, Bitcoin Investments Trust and Blockchain Capital.

ETF is an exchange-traded investment fund. Each such fund has a basic asset, including stocks, bonds, commodities, etc. Simply put, this is a ready-made investment tool.



Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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