Recent events should make you withdraw all your coins to your own wallet: Part 2

[buwaytress]

Bump.

Looks like I was wrong about BlockFi being the next to collapse, as despite a $485 million bailout from FTX just 10 days ago, Voyager are next to freeze all their customers' accounts, essentially holding their money hostage: https://www.investvoyager.com/blog/voyager-update-july-1-2022/.

According to their filed reports (https://www.newswire.ca/news-releases/voyager-digital-provides-market-update-851734302.html), out of $1.12 billion in assets they had loaned out to generate interest, $654 million of those were with Three Arrows Capital, who recently went bankrupt. That's almost 60%. You've got to wonder why they are handing out non-collateralized loans of 60% of their assets. And you've got to wonder why people believed that 10% returns was somehow sustainable. I suspect the answer is greed in both cases.

And looks like BlockFi have just increased their FTX funded bailout from $250 million to $400 million: https://blockfi.com/a-message-from-our-founders-july-2022. And with that comes an option for FTX to buy BlockFi at just $240 million or even less. BlockFi used to be valued at $4.5 billion, and is now potentially being sold at 5% of that. They are sinking fast.

^ Nice update. Now it reminds me that I actually experimented with NEXO a while back, and provide semi-updates to this thread every now and then, probably due an update once they clarify and adjust rates (some time this month).

They refreshed their landing page and sent out a flurry of emails to users last month after Terra, 3 Arrows, Blockfi etc. And seem to almost be egging on their lending rivals by saying "This is why we do over-collateralisation for every loan" (referencing that they need minimum 100% collateral to lend out any money).

There isn't exact proof of this (I ask actually every now and then) -- even though they provide a real-time audit to all their customers of held assets, it's not proof that it's enough to cover all outstanding loans (an unknown number) if defaulted. Last month, though, they upped their insurance cover to $650M (still I believe hardly enough to cover anything in end-game scenario) so clearly they're digging in and expecting a lot of defaults.

My point -- sorry if I didn't look like I was getting there -- is that I'd assumed all lenders were doing at least 100% collateral on loans. How naive of me.

[1714121514]

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[o_e_l_e_o]

Now it reminds me that I actually experimented with NEXO a while back

Hope you've since withdrawn all your coins back to your own wallets!

There isn't exact proof of this (I ask actually every now and then) -- even though they provide a real-time audit to all their customers of held assets, it's not proof that it's enough to cover all outstanding loans (an unknown number) if defaulted.

As you say, an audit proves nothing. We know these companies are all running fractional reserve systems and not keeping enough in reserve to cover their liabilities. All it takes is for one of their outstanding debts to default (as it just did with 3AC), and everything goes to shit.

Last month, though, they upped their insurance cover to $650M (still I believe hardly enough to cover anything in end-game scenario) so clearly they're digging in and expecting a lot of defaults.

Any idea how big Nexo's position with 3AC is/was?

My point -- sorry if I didn't look like I was getting there -- is that I'd assumed all lenders were doing at least 100% collateral on loans. How naive of me.

I think it makes sense when you think about. There platforms which are offering 20% returns to their users must be making even more than that from the entities they are lending to in order to cover their own (substantial) profits. If I want a bitcoin loan, and I have 100% collateral to cover it, there are far more attractive rates that I can access than ~25% interest. I would only have to pay such high rates if my loan was partially or fully unsecured.

[dkbit98]

Voyager are next to freeze all their customers' accounts, essentially holding their money hostage

I never even heard about Voyager app until now, and I don't know why people use that for such a small earning percentage.
Taking a big risk, giving custody of your bitcoin to someone else, just to earn 12% annually is a terrible deal, but hey who am I to judge what other people are doing.
I just checked their website and sure enough, they have their own shitcoin token with revolutionary staking crap...
Let's make prediction for next crypto vompany going bust in this bear market, maybe something connected with Tether?

[o_e_l_e_o]

I never even heard about Voyager app until now, and I don't know why people use that for such a small earning percentage.

Greed and naivety. Every time in the past I've pointed out the risks involved in these platforms on this forum, there have been multiple other users saying how they are using these platforms and they've been working fine, they've never been scammed, yadda yadda. It all works great until it doesn't.

I just checked their website and sure enough, they have their own shitcoin token with revolutionary staking crap...

Give us your bitcoin and we'll give you a worthless shitcoin which we can print more of at will. You can then stake your shitcoin to earn more shitcoin, while we spend your bitcoin and then freeze everyone's account!

Let's make prediction for next crypto vompany going bust in this bear market, maybe something connected with Tether?

Looks like FTX have gone in for full bailout of BlockFi, so they will probably survive a bit longer than anticipated. Nexo just slashed all their interest rates, so they must be struggling too. Lots of rumors going around about KuCoin as well. Obviously we can't tell for sure who will be the next to collapse, but it will be someone. Only safe place for your coins is in your own wallet.

[buwaytress]

Now it reminds me that I actually experimented with NEXO a while back

Hope you've since withdrawn all your coins back to your own wallets!

I didn't put much in there, just enough to try and earn interest in their nexo shitcoins to get me up a level, and stablecoins (with max interest). It was meant to be an experiment, and still ongoing, I'd never put my main Bitcoin in there beyond what I can afford to lose.

It's been an interesting journey to say the least, as I know am a semi-expert in proof of source of funds, proof of ownership, etc. They have an intense KYC process I've never experienced with any platform before.

No idea how big their 3AC position is, they actually answer me quite promptly on a lot of questions, still vague but generally of a much higher level than any other service customer support I've ever come across.

I think it makes sense when you think about. There platforms which are offering 20% returns to their users must be making even more than that from the entities they are lending to in order to cover their own (substantial) profits. If I want a bitcoin loan, and I have 100% collateral to cover it, there are far more attractive rates that I can access than ~25% interest. I would only have to pay such high rates if my loan was partially or fully unsecured.

NEXO can be quite attractive if you find out about their rates and don't mind adjusting capital around -- for example, you could actually put up collateral and borrow 10% of the value with near-zero interest... and still earn interest on that borrowed amount. I've been doing that, and paying the interest daily, there's a small bit of leftover interest actually so making profits from borrowed capital, just annoying to do it every day (as it compounds).

They do seem to be a bit more "advanced" than blockfi, celsius, etc, and as mentioned, they require minimum 100% collateralisation for all loans, so I'm not sure if they've found a way to ride this bear out safely -- wouldn't bet on it until they make their real time audit fully transparent.

[Just a note to anyone reading, totally not advising anyone to try any lender. Not your keys cannot be emphasised enough]

[o_e_l_e_o]

NEXO can be quite attractive if you find out about their rates and don't mind adjusting capital around -- for example, you could actually put up collateral and borrow 10% of the value with near-zero interest... and still earn interest on that borrowed amount.

So you are risking your funds to earn ~4% interest on ~10% of the amount you risk? That's a big risk for very little gain.

I've been doing that, and paying the interest daily, there's a small bit of leftover interest actually so making profits from borrowed capital, just annoying to do it every day (as it compounds).

Sure, but your collateral is currently in the hands of an unknown third party which could go bankrupt at any time, meaning you lose everything, as just happened with 3AC.

They do seem to be a bit more "advanced" than blockfi, celsius, etc, and as mentioned, they require minimum 100% collateralisation for all loans

100% collateral for the average user, yes. But not for institutions or other large entities. They will be getting loans which are under collateralized or not collateralized at all. This is the crux of the problem that hit Celsius and now Voyager - huge uncollateralized loans to 3AC.

[buwaytress]

NEXO can be quite attractive if you find out about their rates and don't mind adjusting capital around -- for example, you could actually put up collateral and borrow 10% of the value with near-zero interest... and still earn interest on that borrowed amount.

So you are risking your funds to earn ~4% interest on ~10% of the amount you risk? That's a big risk for very little gain.

In addition to the interest you also earn on the collateral actually (again, depending on the asset, long story short you've to buy a portion of their shitcoin). Again, just an experiment to gain some insight into the models they use but also because I was really curious about the compliance and banking license process they've been working on for the past few years.

Absolutely am not in an illusion that they're actually going to go on forever -- but to further explain my personal interest, which I didn't make part of the thread I update in: there's also a long back story to NEXO owners -- Romanian owners, CEO himself is directly linked to the mafia (as a politically exposed person/PEP) via his father, and a decades-long effort to legitimise their wealth.

How they managed to get their various licenses (including in several US states) is probably a story in itself.

100% collateral for the average user, yes. But not for institutions or other large entities. They will be getting loans which are under collateralized or not collateralized at all. This is the crux of the problem that hit Celsius and now Voyager - huge uncollateralized loans to 3AC.

Yeah, a big circle-jerk of people loaning each other money to squeeze out as much leverage as possible. They all thought BTC was going to 100k, huh.

[o_e_l_e_o]

Obviously we can't tell for sure who will be the next to collapse, but it will be someone. Only safe place for your coins is in your own wallet.

Well, that didn't take long: https://www.vauld.com/blog/corporate-statement/

Vauld are another centralized lending platform which is popular in Singapore and India. Their backers include Coinbase and Peter Thiel. From various news articles it seems that they had at least $1 billion in crypto assets under management, and they say that their freezing of all accounts was prompted by $200 million of withdrawals since June 12th. However, on June 16th, they made a blog post saying everything is fine: https://www.vauld.com/blog/vauld-continues-to-operate-as-usual/. Maybe that should be yet another warning to everyone who is ignoring the warning signs from other lenders because their CEO is posting on Twitter that everything is fine.

They all thought BTC was going to 100k, huh.

It is, eventually. And all the people who simply kept their bitcoin in their own wallet and didn't lose it by gambling on platforms with unsustainable promises will be the ones who come out on top.

[buwaytress]

Well, that didn't take long: https://www.vauld.com/blog/corporate-statement/

Vauld are another centralized lending platform which is popular in Singapore and India. Their backers include Coinbase and Peter Thiel. From various news articles it seems that they had at least $1 billion in crypto assets under management, and they say that their freezing of all accounts was prompted by $200 million of withdrawals since June 12th. However, on June 16th, they made a blog post saying everything is fine: https://www.vauld.com/blog/vauld-continues-to-operate-as-usual/. Maybe that should be yet another warning to everyone who is ignoring the warning signs from other lenders because their CEO is posting on Twitter that everything is fine.

Singapore's too hot now I think, been a lot of public outcry since even last year on various crypto companies (exchanges, crypto projects, you know the shitcoin type), then Terra, now this. Suspect the Monetary Authority is going to swoop in and do audits on all the exchanges and lenders there pretty soon, at least internally.

Wonder also if the Chinese bank runs from last month have anything to do with this. I know they're not directly into crypto and the problems have been tied to fraud in development projects but someone had to finance all those guys who flew the coop in the China crypto exodus -- many of whom landed in Singapore.

They all thought BTC was going to 100k, huh.

It is, eventually. And all the people who simply kept their bitcoin in their own wallet and didn't lose it by gambling on platforms with unsustainable promises will be the ones who come out on top.
[/quote]

They all thought BTC was going to 100k, huh.

It is, eventually. And all the people who simply kept their bitcoin in their own wallet and didn't lose it by gambling on platforms with unsustainable promises will be the ones who come out on top.

Oh yeah, that's for certain. I meant that they took surefire bets on 100k in 2021 and still thought it would happen despite all the writing on the wall, thinking the bull would extend its overstay.

Still can't really understand the allure of 4-10% APY with all that risk, when Bitcoin already provides gains that outstrip that (only, over multi-year) without an iota of that risk.

[o_e_l_e_o]

Wasn't expecting to be updating this thread almost every day, but here we are.

CoinLoan reduce their withdrawal limits by 99%, from $500,000 a day to just $5,000 a day: https://coinloan.io/blog/temporary-change-in-withdrawal-limits/

Voyager have filed for bankruptcy in NY: https://www.forbes.com/sites/ninabambysheva/2022/07/06/crypto-broker-voyager-digital-files-for-chapter-11-bankruptcy/

Meanwhile Crypto.com have slashed their rewards while hiking their fees. Obviously feeling the pinch as well.

[PrimeNumber7]

I think it is very unlikely that Celsius' customers will not see any of their coin again. It is more likely they will face losses, and will experience delays in being able to withdraw the amounts available to customers.

Getting pennies on the dollar for what little assets they manage to recover will be little consolation.

My opinion is that Celcius (and other similar companies) was facing a 'run on the bank' after the collapse of TerraUSD that resulted from a mismatch of the maturities of their assets (loans) and liabilities (customer deposits), along with likely loan losses resulting from the value of the collateral being less than the repayment values of the various loans they made.

The first issue will eventually be solved by halting withdrawals, and waiting for customers to repay their loans. The second issue will lead to actual losses to their deposit holders, assuming there is insufficient equity to cover the losses. I have read reports that those who have repaid loans have been unable to withdraw their collateral, which may indicate they plan on socializing losses to borrowers who have excess collateral.

FUD

What is the withdrawal process?

Published September 8, 2020

Crypto withdrawals are subject to a security hold and processed the next business day after that hold clears. If the request is placed before 8PM EST (00:00 UTC), it will be processed the next business day. If the request is placed after 8PM EST (00:00 UTC), it will be processed in two business days. Withdrawals are processed between 12PM-8PM EST and are only processed on business days. ...

<>Personally, I wouldn't be using an exchange that requires holding your coins for security checks.

Obviously, it is nice to have the ability to ~instantly withdraw your coin, however, when you deposit your coin on a centralized exchange, you are giving them access to your money.

IMO, the reason for the security checks is not necessary to confirm that you are the rightful owner of your account, but also to confirm that your available balance is actually equal to or greater than the amount you are attempting to withdraw. I assume these exchanges use automated checks to prevent people from withdrawing amounts exceeding their available balance, but those exchanges that hold withdrawals for "security checks" also likely add a human component to add an actual person's judgment when deciding if a withdrawal should be allowed or not.

Obviously, these types of delays in withdrawals should be disclosed ahead of time, specifically prior to receiving deposits, and prior to implementing said policy for those who have already deposited. If a customer deposits money knowing they will have to wait for said security checks, it should not be a surprise when they are having to wait.

[Don Pedro Dinero]

I suppose that this thread is being raised in a global way but I wanted to comment here that there is an exchange in Spain that has closed down leaving 100,000 people without access to their funds. If they had withdrawn their own wallets, as oeleo says, this would not have happened.

Spanish crypto platform 2gether closes unexpectedly: RTVE

First they announced in a strange way that they were going to charge 20 euros to certain accounts, but shortly after announcing it they disappeared from the social networks, the website is not working, and those who managed to request a withdrawal before the website stopped working are complaining that they have not received it, which looks like an exit scam.

[o_e_l_e_o]

along with likely loan losses resulting from the value of the collateral being less than the repayment values of the various loans they made.

Or, in many cases, handing out uncollateralized loans worth hundreds of millions of dollars.

but those exchanges that hold withdrawals for "security checks" also likely add a human component to add an actual person's judgment when deciding if a withdrawal should be allowed or not.

And a platform which has assets of over a billion dollars can afford to pay to have someone available to perform these checks 24/7. Holding withdrawals for 5 or more days is completely unjustified, and just a method to protect their fractional reserve system from a bank run.


Looks like blockchain.com have also lost $270 million due to 3AC: https://www.reuters.com/technology/blockchaincom-faces-270-mln-hit-loans-bankrupt-three-arrows-coindesk-2022-07-08/

And it turns out that Tether had a loan with Celsius as well: https://tether.to/en/tether-discloses-celsius-loan-liquidation-process/. Of course Tether have said that this liquidation will have no affect on their reserves, but given that we know that Tether repeatedly lie about their reserves, and we've just seen a bunch of other platforms lie and say everything is fine shortly before they shut down and file for bankruptcy, then make of that statement what you will.

[stompix]

Meanwhile Crypto.com have slashed their rewards while hiking their fees. Obviously feeling the pinch as well.

When you think printing tokens out of thin air will get you unlimited money forever, that's how things end..
Crypto.com was not getting most of their revenues from actual usage but from selling their token and listing cryptos and projects and taking a chunk out of those, since the hype died down, the consequences of not having a solid revenue model popped immediately:

Oct 28 2021
Crypto.com Plans Monumental $100M Ad Campaign, Taps Matt Damon to Feature

20 iun. 2022
Ad spending on TV has also been down: Crypto.com’s marketing expenses decreased to $2.1 million in May, from $15 million in November of last year

And when your revenue is down, what do you do, hammer your clients so you will lose customers and more revenue..
This was the moment to slash fees, to survive on assets put aside from the bull run, and to destroy your competition by offering cheap services, instead, they are doing it completely the opposite way.

[o_e_l_e_o]

Crypto.com was not getting most of their revenues from actual usage but from selling their token and listing cryptos and projects and taking a chunk out of those

Don't forget forcing their users to buy and hold their worthless token so they can "unlock" various tiers of rewards. And then of course when it comes to sell the token because you are leaving the platform, it is only worth 10% of what you bought it for.

This was the moment to slash fees, to survive on assets put aside from the bull run, and to destroy your competition by offering cheap services, instead, they are doing it completely the opposite way.

The last few weeks have made it clear that very few of these platforms put aside any assets during the bull run on which they could now fall back on, and seemed be operating on the notion that bitcoin would just increase in value forever. Either complete naivety and amateur behavior from their owners, or they simply don't care if all their users get liquidated as long as they get to run off with some nice profits.

[PrimeNumber7]

along with likely loan losses resulting from the value of the collateral being less than the repayment values of the various loans they made.

Or, in many cases, handing out uncollateralized loans worth hundreds of millions of dollars.

Do you have a source for this?

but those exchanges that hold withdrawals for "security checks" also likely add a human component to add an actual person's judgment when deciding if a withdrawal should be allowed or not.

And a platform which has assets of over a billion dollars can afford to pay to have someone available to perform these checks 24/7. Holding withdrawals for 5 or more days is completely unjustified, and just a method to protect their fractional reserve system from a bank run.

They disclosed this policy, and it was public before their customers deposited their money. I don't think it is fair to cry 'scam' when this policy has been in place for time, and those trying to withdraw should not be surprised when they have to wait for a withdrawal.

It should also not be a secret that any company that pays interest on customer deposits is lending out those deposits (aka acting as a fractional reserve bank). There is literally no other way in which any company would be able to pay interest on deposits and not go out of business.

And it turns out that Tether had a loan with Celsius as well: https://tether.to/en/tether-discloses-celsius-loan-liquidation-process/. Of course Tether have said that this liquidation will have no affect on their reserves, but given that we know that Tether repeatedly lie about their reserves, and we've just seen a bunch of other platforms lie and say everything is fine shortly before they shut down and file for bankruptcy, then make of that statement what you will.

The teather statement said two things:
1 - that tether.io made an equity investment in celsius, and that equity investment is not part of their reserves.
2 - that tehter lent money to celsius, that was secured by collateral, which was held by tether, and in accordance with the terms of said loan, the collateral was liquidated to satasify (pay off) the loan in full, and excess collateral was returned to tether.

I am not aware of any facts to suggest tether is in danger of having less than full reserves as a result of what is happening with celsius. I think the speculation that tether will file bankruptcy and/or will be unable to redeem all of the USDT they have issued is baseless speculation.

[o_e_l_e_o]

Do you have a source for this?

You can see from Voyager's accounts which I linked to earlier in this thread: https://www.newswire.ca/news-releases/voyager-digital-provides-market-update-851734302.html

Crypto assets loaned: $1.12 billion
Crypto collateral held: $0.17 billion

Even considering the drop in value of most cryptos, that is insufficient to explain how they are holding so little collateral for such high liabilities. The were absolutely handing out under- or non-collateralized loans.

Voyager also admit handing out uncollateralized loans in the following legal case in NJ:

23. In a response to an August 6, 2021 inquiry from the Bureau to Voyager, Voyager noted that "[a]s of the date of the request, all of the outstanding institutional lending activities represent uncollateralized loans."

It should also not be a secret that any company that pays interest on customer deposits is lending out those deposits (aka acting as a fractional reserve bank). There is literally no other way in which any company would be able to pay interest on deposits and not go out of business.

And yet, they deliberately don't make that obvious on their sites. And despite however many times I've told people to avoid these platforms, there are always multiple users saying "Well, they wouldn't do anything risky, funds are safu!"

The teather statement said two things:

Tether have said a lot of things which have turned out to be complete lies over the years, not least of which being "Tether is backed up 1-to-1 with USD". We've discussed this before: https://bitcointalk.org/index.php?topic=5322147.msg56656992#msg56656992. See also: https://bitcointalk.org/index.php?topic=5129382.msg51051918#msg51051918

[PrimeNumber7]

Do you have a source for this?

You can see from Voyager's accounts which I linked to earlier in this thread: https://www.newswire.ca/news-releases/voyager-digital-provides-market-update-851734302.html

The post you were replying to was specifically about Celcus. I am really not familiar with Voyager.

It should also not be a secret that any company that pays interest on customer deposits is lending out those deposits (aka acting as a fractional reserve bank). There is literally no other way in which any company would be able to pay interest on deposits and not go out of business.

And yet, they deliberately don't make that obvious on their sites. And despite however many times I've told people to avoid these platforms, there are always multiple users saying "Well, they wouldn't do anything risky, funds are safu!"

Ultimately, it is up to the users of a business to properly review and understand the terms they are agreeing to prior to doing business with said business.

I don't think the lack of ~instant withdrawals is necessarily an indication that funds are not safe. It is likely more of an indication of the business not using a hot wallet, or using a smaller hot wallet.

[o_e_l_e_o]

The post you were replying to was specifically about Celcus. I am really not familiar with Voyager.

I've been speaking in generalities about all these shady platforms throughout this thread, but here is some info for Celsius:

“Celsius’ total uncollateralized loans are less than a fraction of 1 percent out of tens of thousands of loans issued since 2018,” Golovina told CoinDesk by email on July 13, referring to the number of loans but not the dollar volume. “All of these were normal size loans and were done to institutions with billions of dollars in equity.”

When subsequently asked about the dollar volume of the uncollateralized loans and about Mashinsky's denial of their existence on the AMA, Golovina did not provide a response.

Admit to making uncollateralized loans, and then go suspiciously silent when asked about the volume of those loans or why their CEO previously denied their existence.

Celsius required its business borrowers to post only an average of about 50% collateral on its $2.7 billion of loans as of last spring, the documents show. Undercollateralized lending is considered a risky practice, one that was more generous than that of many of Celsius’s competitors. Celsius used some of that collateral to borrow more money itself, a process known as rehypothecation, adding additional risk.

Give out undercollateralized loans, and then spend that collateral yourself, leaving the loans with zero collateral you can fall back on.

It is likely more of an indication of the business not using a hot wallet, or using a smaller hot wallet.

Or a business not actually having access to the funds they need to cover customer withdrawals.

[PrimeNumber7]

Celsius required its business borrowers to post only an average of about 50% collateral on its $2.7 billion of loans as of last spring, the documents show. Undercollateralized lending is considered a risky practice, one that was more generous than that of many of Celsius’s competitors. Celsius used some of that collateral to borrow more money itself, a process known as rehypothecation, adding additional risk.

Give out undercollateralized loans, and then spend that collateral yourself, leaving the loans with zero collateral you can fall back on.

The rehypothecation practice is particularly troubling to me, probably more so than the making under collateralized loans. The rehypothecation adds an additional layer of risk that they will be unable to cover withdrawals as they are requested by deposit holders, and borrowers as they pay off their loans.

It is likely more of an indication of the business not using a hot wallet, or using a smaller hot wallet.

Or a business not actually having access to the funds they need to cover customer withdrawals.

Starting to delay withdrawal requests is an indication that they lack funds to cover withdrawals, but maintaining a long-standing practice of not immediately processing withdrawals until the following business day does not indicate that, as long as the delay is not increasing. They have a cutoff time, and as long as all withdrawals requested prior to the cutoff time are processed according to their schedule, all else being equal, I would not think they are having liquidity problems.