However, the same people who say that recommend crypto interest earning accounts such as BlockFi or Celsious.
It's worth taking a closer look at just
why it is such a bad idea to leave you coins in these platforms. Let's have a look at some quotes from their Terms of Services. Emphasis mine throughout.
First BlockFi:
Except where prohibited or limited by applicable law, in consideration for the cryptocurrency earned on your account, you grant BlockFi the right, without further notice to you, to hold the cryptocurrency held in your account in BlockFi’s name or in another name, and to pledge, repledge, hypothecate, rehypothecate, sell, lend, or otherwise transfer, invest or use any amount of such cryptocurrency, separately or together with other property, with all attendant rights of ownership, and for any period of time and without retaining in BlockFi’s possession and/or control a like amount of cryptocurrency, and to use or invest such cryptocurrency at its own risk.
...
You will indemnify and hold us and our affiliates harmless from any losses, damages, suits and expenses, of whatever kind, including reasonable attorneys’ fees, which we may incur in connection with or arising out of your use of your Crypto Interest Account or our activities in connection with such account, your violation of any law, regulation, order or other legal mandate, or the rights of a third party, or any act or omission by your agent, representative or third-party service provider while using your Crypto Interest Account, regardless of whether the specific use was expressly authorized by you.
Now Celsius:
In consideration for the rewards earned on your Celsius Wallet and the use of our Services, you grant Celsius, subject to applicable law and for the duration of the period during which the Digital Assets are available through your Celsius Wallet, all right and title to such Digital Assets, including ownership rights, and the right, without further notice to you, to hold such Digital Assets in Celsius’ own virtual wallet or elsewhere, and to pledge, re-pledge, hypothecate, rehypothecate, sell, lend, or otherwise transfer or use any amount of such Digital Assets, separately or together with other property, with all attendant rights of ownership, and for any period of time, and without retaining in Celsius’ possession and/or control a like amount of Digital Assets or any other monies or assets, and to use or invest such Digital Assets.
...
You agree to indemnify and hold harmless Celsius and its employees, managers, partners and Affiliates from any losses, damages, suits and expenses, of whatever kind, including reasonable legal fees, that we incur in connection with or arising out of your use of your Celsius Wallet and/or the Services, or our activities in connection with such Celsius Wallet, and for your violation of any law, regulation, order or other legal mandate, or the rights of a third party, or any act or omission by you or any person acting on your behalf while using your Celsius Wallet, regardless of whether the specific use was expressly authorized by you.
In other words, they will hand out your coins to anyone they like, be it individuals, business, corporations, exchanges, investment banks, whoever they like, they won't tell you that they are doing, they won't hold any other assets in collateral for your coins, and if any of these hundreds of anonymous third parties default on their loans, make bad investment decision, scam, go bankrupt, whatever, there is absolutely nothing you can do about it except wave bye-bye to all your coins.
I don't understand why people are jumping into all this lending and DeFi crap.
For the same reason people jumped on the ICO train. The vast majority of users have zero knowledge regarding the technology (or lack thereof) which underlies such altcoins and projects, and have zero interest in acquiring such knowledge. They simply want profits, and the vast majority will end up holding bags of some worthless token in a year or two. If they had just bought and held bitcoin instead they would be touching all time highs, instead of holding some useless token which is down >95% from its all time high.
