I know what you're thinking...
guaranteed returns? you must be new
poloniex? you must be new
You are correct in all of your assumptions!
I am fairly new to the crypto game. It is for exactly this reason that I decided to give lending with poloniex a try. I don't know enough about the markets to make well informed trades or get into anything too complex. I'm also aware that poloniex has had some issues/bad press lately, however they have a great long term track record, and I've also heard that while their customer support sometimes takes a while to respond, they are great once they do.
Let me tell you why I decided to go this route...
Cryptocurrencies are highly volatile, as I'm sure you know. Lending is the safest way I've found to make steady long term returns. It's not unheard of to expect a 35%+ APR (compounding) yearly using the method I'm about to describe. That number is actually fairly conservative.
For those of you who don't know, lending on poloniex is essentially loaning currency to margin traders. When the market rises or falls drastically, margin traders want loans, and they want lots of them - this causes the interest rate you receive on the loan to be quite impressive. Loan rates operate on the principle of supply / demand, just like crypto.
Right now loans are at around .08 - .09% DAILY. That translates to roughly 29 - 33% APR (compounding). The formula that will tell you exactly how much is:
(interest rate) * 365
poloniex also takes a cut of 15% of your profits. Obviously not ideal, however it's a small price to pay in my opinion, for the closest thing you're going to get to guaranteed returns in the unpredictable, volatile market we all know and love so much.
Another thing to consider is that in addition to the interest you'll make on lending, your currency has the potential to rise at the same time (obviously). Some people simply hold on to it and do extremely well. Lending takes that a step further.
So lets take a closer look at the poloniex interface...
Once you've signed up, logged in, and pressed the lending button, you'll be presented with the following:
LOAN DEMANDS
This is where margin traders are essentially saying "I will pay up to (X)% interest, for a loan with a duration of (Y) days, and I need (Z) BTC". Often you will see rates that are very high, up to 5% or more. This doesn't really matter as much to us, as lenders. We are more concerned about offers.
LOAN OFFERS
This is the list of active offers that are currently available to margin traders. The lowest offer will be filled first. You can either undercut the list, or put in a higher offer and wait for it to be filled. Too high of an offer may sit indefinitely, however.
OFFER BTC (or whatever currency you're loaning)
Pretty self explanatory based on the descriptions above. This is where you are putting in your offer. Minimum amount of BTC is .01. You can also choose to put the offer back up once the loan is paid back, if you wish, by checking "renew".
I'm just doing some testing, so I don't have much in the game as of yet, but I was pretty happy with the interest rates I was able to get based on what I have seen over the past 12 hours or so:
I hope you enjoyed my post. Let me know what you think in the comments, and if you end up giving lending a try, let me know how it goes for you!
on bitfinex you often got up to 1% per day with btc, eth and usd. You have to be quick saw and take an eye on the walls
thanks for the info. ill do some research and maybe give them a try
I am new to crypto.... I knew nothing about this. Awesome, Thanks for the post
thanks paula. let me know if you end up giving it a shot. id be interested to see how you do!
not sure I am brave enough
unfortunately no crypto transactions are guaranteed. this is one of the safest ways to get into the game, however
Lending is safe depending on market conditions. If the price of bitcoin is falling people will only be delighted to "short" your bitcoin. (Getting at 2500$ returning at 2450$)
It is a great way to make a nice steady profit if your holding long.
I personally would prefer to short my own shares and maximize profit.
EDIT: Of course the opposite is always possible. It is a good idea to keep an eye on the volume of loans. If they are very cheap it is an indicator the price is going up.
indeed. in which case my bitcoin is going up in value as well, plus the small amount of interest im making adds to that. win/win. im definitely in this for the long haul :)
Lending is a really good option for new traders while they learn about the cryptocurrency market and about margin trading. So you can get returns without risking their capital.
agreed! thanks for reading
good job!
Good post. I've been interested in this, but what if the people who borrow your coins default?
poloniex is setup so it automatically liquidates the funds in the lenders account if they drop too low. if the market were to drop very rapidly, ive heard there is a chance of that happening. ive also heard poloniex has never had this happen, not even once.
Thanks for the response. I opened an an account and started lending. Looks promising.
Informative keep sharing.
Polionex doing this kind of shaddy stuff makes me mad. I don't trust it. I dislike it. It just looks like a really bad scam.
as i mentioned, they have had some bad press lately, but otherwise have a stellar reputation
I mean the loan system is just bad. Just like bitconnect
Good article. Upvoted and followed.
Lending on Polo is definitely profitable, but I have learned a few tricks over the years.
Protip:
Never post your offer at the top. Many large traders run lending bots that try to fill the order book with tiny offers in hopes of pushing the lending rates lower. Always scroll down past all the tiny little offers and place your offer at a higher rate.
great advice, thank you. i did exactly this for my first couple of loans!
Very well explained. I am not on POLO right now, but it seems a nice way to earn some passive money!