Update On Hodlnaut: Probably Not Worth It Anymore

15 June 2022 Update: Due to the lack of transparency of most centralised custodians and the risk of contagion in a crypto bear market, I no longer recommend anyone to park more than 10% of their crypto assets with a single custodian. I have personally withdrawn >95% of my funds out of Hodlnaut and into a cold wallet for self custody.  

Celsius has imploded. They are facing a bank run (with withdrawals > liquid assets) and obviously in cryptoland, the state will not be stepping in. So Celsius has suspended all crypto withdrawals. Basically, if you are a Celsius user, your assets are frozen until further notice.

With this backdrop, I think one has to be aware of potential contagion to other CeFi organisations. Especially if more panic ensues.

Not too long ago, I actually believed in a 70/30 allocation between self-custody and relying on CeFi. With this development, I will have to move to at least 90/10.

I have shilled Hodlnaut pretty hard over the past year and with good reason since their max USDC rates were at 14% which is more than 10 times the risk-free rate for SGD deposits.

However, in light of recent developments, I have already moved all the BTC and ETH out of Hodlnaut, at least for the short term until after the dust settles. No longer worth it to risk so much for a ~5% interest.

The current USDC rates at Hodlnaut is 9% which is also meh if you consider that SSB rates are already near 3%. Yes, it’s still 3 times the rate but one would have to assess based on the risk/reward ratio. My view is that it’s not that favorable anymore.

If you parked alot of assets into Hodlnaut because of my articles, I would encourage you to  reconsider, do your own due diligence and manage your risk. Hopefully, nothing major happens and in a year’s time we can write this off as just a PTSD episode after Luna and UST.

Stay safe, folks. Things are rocky out here.

4 Replies to “Update On Hodlnaut: Probably Not Worth It Anymore”

  1. Food for thought – by offering double-digit yield, you know the counterparty is taking on a ton of risk to pay off the 14% cost of capital.

    If we dive deeper into it, what I can think of that has a high pay-off is (1) trading the volatility, (2) sustaining a ponzi (e.g. borrowing to payoff said promised returns). This is all good when the market is on the uptrend, but when the market crashes then you will see high default rates and withdrawals that are frozen.

    Now, one would argue how is different from lending/borrowing equity shares? Good question – equities are regulated and you know the exchanges (NYSE, SGX, HKex, etc) are well-capitalized and any counterparty risk is negated by the said exchange. The same can’t be said for Celsius, Binance or Holdnaut.

    Just my 2 cents.

    Best,
    JW

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