The Aftermath of Crypto Lending

At one point, the crypto lending market was considered the next big thing. There were even talks that these businesses could end the banking industry as we know it. Massive amounts of money were being made, and it was as easy as just a few clicks on your computer, and the options were endless. Easily lending out your Bitcoin or Ethereum for 6–8%, and stablecoins for 8%-12%. There were dreams that in the future you would be able to live solely off the interest being earned lending to these 3rd party companies. But, suddenly that dream died. During 2022 nearly all of the crypto lending companies went bankrupt or insolvent, which led to them freezing users' assets on their platforms. With no guarantee that they will even see a small percentage of their original assets returned to them. As for the remaining companies, FUD continued to spread leading to real doubt if they were going to be the next domino to fall.

One thing was for certain, the crypto lending market will never be the same after everything that happened in 2022. With many people left wondering if it could mean the end of it.

To understand the current situation we must look at how we got into this position. While cryptocurrency has always been a market of greed, this last cycle will be remembered as the one where people became completely blinded by it. We saw the high-interest rates being offered by Celsius, Voyager, BlockFi, Anchor, Vauld, Hodlnaut, FTX, and viewed it as free money. While we recognized that there was risk, the truth is that we overlooked it all in the name of earning passive income.

The sad thing is that all of this wasn’t even necessary. With how much potential Bitcoin, Ethereum, and the crypto market, in general, to continue appreciating in value in the future. Taking the risk to lend out your crypto was like picking up pennies in front of an oncoming freight train. What’s even sadder is that many people ignored the risks as the dominoes began falling. If they were lucky enough to take their funds off of Celsius before the insolvency, they moved them to BlockFi, then continued down the lending services line. When they should have immediately withdrawn to self-custody instead.

During the golden days of crypto lending, I was a large supporter of it. By using a set percentage of your portfolio to lend out, it was a great method to earn passive income. However, I always recognized the risk and only lent out a certain portion of my Bitcoin. Always watching the market like a hawk for any signs of trouble. Eventually, those signs of trouble did come, which caused me to immediately withdraw all of my funds to self-custody. I was lucky to escape unscathed from the crypto lending disaster, but unfortunately, there were many who were not. If they are lucky they will receive a small portion of their crypto back. If they’re not lucky, they’ll lose everything.

Would You Ever Lend Crypto Again?

There is no denying how enticing a feature lending out crypto to earn passive income was. Just by lending out my Bitcoin, I was able to earn several hundred dollars each month. For that reason alone, people in the future will once again ignore the risks and be blinded by the dollar signs that they see. But would you?

For the people who would be interested in lending their crypto again, there is likely a similar way of thinking they all share. They are choosing to believe that the companies that remain solvent today are companies that are actually running sound businesses. That if they could survive all of the chaos that happened last year, they could survive anything.

There is also hope that those insolvencies were necessary for this market to grow and improve. They have learned what works and what doesn’t. That they will be much more responsible in the future. Finally, there is hope that these lending markets will be much more heavier regulated. This could result in these services either being safer for retail users or at the very least putting the risks out in the open for everyone to see.

Finally Seeing The Light

While the passive income being earned from these services was great, I choose to believe that many people finally saw the light with everything that happened last year. Once you get burned by the fire, you should be much more wary or careful when considering approaching it once again.

Many people learned their lesson the hard way, but the real hope is that people finally learned the value of what they’re holding. This is an industry that is incredibly young. Experts have claimed that Bitcoin could someday be worth several millions of dollars, and Ethereum could be worth several tens of thousands. If you believe in these predictions then you should be treating your Bitcoin and Ethereum as the treasure that it is. Doing everything in your power to secure it and keep it safe.

As for me, I won’t be lending out my Bitcoin anytime soon. I’ve seen the heartbreak of friends who’ve had a large portion of their savings taken away from them throughout this process. And never want to experience that personally. All of my Bitcoin is currently in self-custody, while I am staking Ethereum and a few other altcoins.

How about you? Would you ever lend out your crypto again?

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