Previously, I wrote a three part series about a plan for interest rate arbitrage.

The goal was to get tradfi loans at the prevailing 3-4% rate, and lend it to crypto earn products earning 8-16%. Services like BlockFi, Celsius, Gemini and others.

That was not a good idea. Earning 8-16% like I thought was not sustainable. Every one of those failed.

Every blockfi bankruptcy

single celsius bankruptcy

one. gemini fail

In what I thought was the final post of the series, I described how I thought those earn products generated revenue:

  1. If you’re bullish on crypto, it’s better to get a collateralized loan against your crypto than to sell it. Lots of people want these loans.
  2. When volatility is high, traders increase leverage to speculate, and are willing to pay more.

#1 is earning interest by issuing overcollateralized loans, and #2 is providing margin for traders.

It turns out that even if earn products were doing some of that, that was not sufficient to produce adequate returns.

Luckily, I was able to withdraw from all of these products, so I did not incur any losses from this strategy.

I don’t have a moral of the story or new insight. I just am stating for public record that I was wrong in those posts.