UPDATE: 1/5/22 – The story below chronicles my investment in Blockfi which is now in bankruptcy proceedings. This was soon after Voyager and Celsius, two other Crypto platforms declared bankruptcy. In mid-summer of 2022 I attempted to get most of my cash out of Blockfi. It was then in stablecoins which were earning interest. My account value by then had already slipped from 27k in September of 2021 to about 12k. This was because crypto had been taking a beating.
It was late one night and my attempts to cash out weren’t being processed by Blockfi. I remember thinking at the time that these guys are going to make me email customer service or call someone to actually let me cash out. I figured they were making it more difficult because they were probably trying to fend off massive redemptions from other scared investors.
As fate and my lack of action would have it I told myself I would try again in the next couple of days. I forgot about it and some time later read that Blockfi was having problems but that FTX was going to step in and help them out. I “knew” FTX was a big player and reputable firm so figured my money was safe for a little while longer. I figured wrong. Soon FTX went under and from what I read they were holding Blockfi’s funds. On November 19, 2022 Blockfi paused withdrawals from their platform – probably for good. So realistically my account value at Blockfi is now $0. And, another one bites the dust.
The worst part of this investment was that I had long known the old adage “not your keys not your crypto.” This simply means that if you decide to invest in crypto which is already a risky enough investment, you should do so in a cold storage wallet like a Ledger or Trezor. These cold wallets are off of the internet and removed from any unregulated centralized platforms. I had decided to remain on those platforms because they were “easier.” Easier sometimes comes at a cost lol. In my case I put about 20k on the Blockfi platform.
Do I regret not putting the investments in a cold wallet. Of course. Do I regret not continuing the cashout process when I initiated it. You betcha. But, one thing with these investments is that when I go into them I do so knowing the decision was mine. I knew the risks involved and in this case those risks came back to bite me in the keester. I don’t mind swinging for the fences every now and then. Nothing wrong with that. In this particular case there were things I should have done better. Lessons learned.
On the positive side I’ve read many stories about folks who had their entire portfolios tied up in crypto firms that went under. There is something to be said for spreading your risk around. Anyway, if you want to read my money diary story it is below.
The Story
Welcome to another edition of my Money Diary. If you haven’t checked out some of my other Money Diary stories be sure to do so. For instance, see my crypto-related Money Diary post Taking Bitcoin Profits. Today’s post concerns my investment in two different cryptocurrencies; the Gemini stablecoin, aka GUSD, and Ethereum.
So in early May I started looking for ways to increase the interest I was making on the cash I have. As you are no doubt aware cash is paying next to nothing these days. Most of the cash I do have is currently making .5% which if you looked around is not a bad interest rate. Most of the places that pay even that are internet banks with little to no overhead. If you want to see the best rates currently out there you can check out bankrates best savings accounts via that link. Currently, some of the best payers are Ally, Vio, Citibank, and Marcus just to name a few.
As per the usual disclaimer I am not an investment advisor and the following information is for entertainment purposes only. Do you own due diligence when it comes to financial matters.
Stablecoins for Higher Interest
Anyway, with the fear that inflation might be coming in a bigger way than it already is I started to look for ways earlier this year to make more money on my money. I have a certain percentage of my investments in the stock market, but I wanted my cash to do more than just sit there. With that in mind I started slowly investing into the cryptocurrencies known as stablecoins.
Stablecoins are a type of crypto tied to fiat currencies, like the U.S. dollar, and typically pay much better than what you can get for cash at a typical bank or brokerage. The goal with stablecoins is to be pegged 1 for 1 to the fiat so that there is no volatility as with other cryptos. Of course, there is no guarantee that this will always be maintained but mostly so far the bigger stablecoins have maintained that 1 to 1 ratio.
I then compared some of the various stablecoins like Tether (USDT), the U.S. Dollar Coin (USDC), True USD (TUSD), Paxos (PAX), Binance USD (BUSD), and Gemini USD (GUSD). Tether, the largest stablecoin, was recently audited by the New York attorney general’s office. They revealed that 65% of the Tether in existence is backed by commercial paper, with ratings unknown on that paper. So, I ruled them out.
The Gemini Stablecoin
As I searched for “stable” stablecoins I came across the Gemini coin started by the Winklevoss twins (of Facebook fame). They started their own platform the Gemini platform along with the Gemini stablecoin. As stated on their own Gemini platform:
“The Gemini Dollar is fully backed at a one-to-one ratio with the U.S. dollar. The number of Gemini dollar tokens in circulation is equal to the number of U.S. dollars held at a bank in the United States, and the system is insured with pass-through FDIC deposit insurance as a protective measure against money laundering, theft, and other illicit activities. Overall, Gemini Trust makes use of a centralized system that helps protect against security threats, giving the Gemini dollar key regulatory advantages over many of its competitors.”
So, Gemini seems like a good stablecoin. I then looked at various platforms that paid interest on the GUSD. While the Gemini platform seems like a good one and one on which I may eventually put some money, I also found Blockfi which pays a bit more interest.
Blockfi is not the only Crypto platform I’m looking to use for stablecoins. I’m also comparing the Celsius Network, the Voyager Network, and Crypto.com. One of the reasons I’m also looking at other platforms is to spread my risk around. First, you don’t want to put all your free cash into stablecoins in case something happens to them. And, you’ll want to spread your risk if you do decide to invest in stablecoins. You can do that by using different platforms. For now, I’ll start with Blockfi.
Blockfi
The Blockfi platform was started in 2017 by Zac Prince and Flori Marquez. They currently pay 7.5% on most of their stable coins including the GUSD or Gemini coin. When I signed up in early May of 21 the rate was 8.6%.
My Blockfi Account
I transferred 20k into Blockfi over the span of a couple of months starting in early May. It was an easy process. As you can see, I have already begun to generate some nice interest in this account. However, in addition to wanting to increase the amount of interest I can make on my cash, I also have another goal, that being to slowly build up a position in Ethereum. I’ll save my thoughts on Ethereum for another post. For now I’ll just say I think it has some great potential.
With that in mind, about a month or so ago, I purchased a couple of Ethereum at a price around $2250 maybe a little higher. As I write this the price of Ethereum is around $1980. Therefore I’m down over $500 on the Ethereum I bought at Blockfi. I’ll give you a screenshot of my blockfi account taken earlier today.
As you can see so far I’ve been paid $142.86 in interest with another $60 currently due to be paid at the end of the month. That accrued interest amount will go up everyday until the end of the month at which point it will be credited to my account.
Currently I’m being paid 7.5% interest on the Gemini stablecoins (GUSD) I own which total $15,640. I’m also being paid 4% on the almost $4,000 of Ethereum that I own. Now, although my total at $19,555 is less than the $20k I started with, I’m happy where I am at.
I’m making about 15 times on the cash than I was making at my bank plus I’m being paid interest on the Ethereum while I wait to see how that investment plays out.
Open a Blockfi Account and Get Rewards
Remember, the funds in your Blockfi account are not FDIC insured so you could lose everything if some catastrophe occurs and Blockfi folds. However, one thing I do like about Blockfi is that because they started in 2017, they have already nicely survived one Crypto Winter. During that time business proceeded as usual. That knowledge gives me encouragement going forward.
If you enjoyed today’s post on Investing in Stablecoins to Earn Higher Interest please let us know in the comments section below and consider sharing it to your social media. Thank you – it is much appreciated!
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