- August 17, 2020
- Posted by: icoblock
- Category: News
This year has been nothing short of tumultuous. Back in March, legacy and cryptocurrency markets went through a massive crash caused by the spreading coronavirus.
As part of the remedies, the US Government started printing trillions of dollars and pumping them into the economy. And while global indices have recovered and even paint fresh all-time highs, experts believe that this will have serious long-term consequences. Some even believe hyperinflation is in play.
CryptoPotato reported in late 2019 that Alan Greenspan, the former Chairman of the US Federal Reserve, warned of approaching negative interest rates.
In market conditions like these, Bitcoin stands out as a viable alternative. It’s a non-inflationary, digitally scarce asset that’s governed by a protocol, rather than individuals.
And while negative interest rates could plague the legacy market, Bitcoin investors have the opportunity not only to preserve the value of their holdings but also to earn interest while doing so.
Enters Hodlnaut – a platform where investors can earn interest on their cryptocurrency by lending it to margin traders.
What is Hodlnaut?
Hodlnaut is a platform that provides financial services for individual investors where they earn interest on their cryptocurrencies by lending it to margin traders, who would otherwise struggle to access crypto loans.
The company was started back in April 2019 and is headquartered in Singapore. It’s a portfolio company of Antler – a global VC firm that backs early-stage startups. According to information shared with CryptoPotato by the team, the platform already holds 750 BTC in deposits and is undergoing a license application with Singapore’s de-facto central bank, the Monetary Authority of Singapore (MAS).
The way it works is relatively simple – users deposit their crypto assets and earn interest in the platform, whereas it lends out these assets to establish and vetted financial institutions that pay interest rates.
Things to Consider
Through Hodlnaut, users can earn interest on a few cryptocurrencies, including Bitcoin and the USDC, and USDT stablecoins. The effective annual interest rates, at the time of this writing, are approximate and as it follows:
- Bitcoin: 6.2%
- USDC: 8.3%
- USDT: 8.3%
It’s also worth noting that these rates take into account the monthly compounding effect. According to the official website, the platforms that borrow from Hodlnaut mostly use the funds as a hedge against Bitcoin’s price or for market-making on their own platforms.
In terms of security, Hodlnaut first receives investors’ funds in their multi-signature wallets, from where they are being stored with BitGo until it’s lent to their partners.
It’s important to note that even though the team keeps the funds on their cold wallets, they don’t currently have third-party insurance to cover any potential hacks or insolvency issues. However, they supposedly “put aside some of the profits” to cover any potential losses.
As part of their risk-management policy, Hodlnaut’s website says that they only lend to Funds “that have a mandate to borrow less than 1 x their Net Asset Value.” It’s also worth noting that the terms disclose that:
“Furthermore, in an event a default happens, Hodlnaut will be taking on the loss and paying our users from our equity funds.”
In conclusion, the platform offers a way for investors to hedge the increasing inflation, while also earning interest in market conditions where negative interest rates are already up for discussion.
Individuals will be able to get comparatively attractive interest rates on their Bitcoin, USDC, and USDT.
The platform is user-friendly and easy-to-use, while the company aspires to be among the fast-growing fintech startups in the region.