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Cryptocurrency News Articles
The Crypto Bull Market Is Back, and So Are the Ultra-High Yield Opportunities to Lure Bitcoin from Investors’ Wallets
Oct 08, 2024 at 06:45 pm
Unsurprisingly, centralized offerings and nascent DeFi projects are bull market-sizing their annual percentage yields (APYs).
Cryptocurrency bull markets are typically characterized by a surge in investment opportunities, each promising astronomical returns. As bitcoin’s price continues to rise, it’s no surprise that both centralized exchanges and nascent decentralized finance (DeFi) protocols are advertising annual percentage yields (APYs) that are sure to turn heads.
However, it’s crucial to approach these offers with a clear understanding of the risks involved and a realistic perspective on what bitcoin itself can offer.
Bitcoin, being a proof-of-work (PoW) asset, does not generate any native yield. This is in contrast to proof-of-stake (PoS) assets like ETH or SOL, which offer a passive return for simply holding the token.
Despite bitcoin’s lack of inherent yield, centralized services are able to generate a passive return for their customers by engaging in activities such as proprietary trading or lending out customers’ deposits. For example, M2, WireX and CoinHold offer a modest 8% APY on bitcoin. This rate can be further increased to 15% on centralized platforms like EarnPark.
It’s important to note that these APYs cannot be directly compared to fiat benchmarks like the US prime rate, which currently stands at 8%. Additionally, unlike PoS assets, holding BTC does not generate a passive yield in the form of more BTC.
For speculators seeking APYs in excess of 15%, there are even more degenerate yields on bitcoin available through less conventional offerings.
Looping up yields through bitcoin-themed DeFi
For those willing to engage in a complex and risky chain of protocols, bitcoin investors can earn outsized returns if everything goes according to plan.
By daisy-chaining a series of protocols — including Ethereum, ZeroLend, Lombard, Contango and Babylon — bitcoin investors can earn a 61% APR, which is currently denominated in a bitcoin-branded token called Lombard BTC, which is pegged to BTC and currently trades at nearly the same price.
This setup essentially allows bitcoin holders to earn a high yield on their BTC without having to sell it or engage in any active trading strategies. However, it’s important to note that the risks of this strategy are also significantly amplified.
While the US dollar offers a risk-free interest rate of 4.53%, there is no such risk-free interest rate for BTC. Despite this, both conventional custodians and DeFi platforms are offering APRs and APYs that start in the high-single digits and reach into the high-double digits for bitcoin speculators.
But as history has shown — with examples like Celsius, Voyager, Gemini Earn and other catastrophes — investors should never forget that high-yield bitcoin scams often come with the grave risk of total loss.
Disclaimer:info@kdj.com
The information provided is not trading advice. kdj.com does not assume any responsibility for any investments made based on the information provided in this article. Cryptocurrencies are highly volatile and it is highly recommended that you invest with caution after thorough research!
If you believe that the content used on this website infringes your copyright, please contact us immediately (info@kdj.com) and we will delete it promptly.
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