Update 01/05/2015: Why Stu Lustman lends on Bitfinex
#How I Earned Bitcoin Last Year
One of the keys to my 18x bitcoin investment performance last year was earning bitcoins through additional investment. Unfortunately those opportunities no longer exist or the risk became too high. This year I’ve been keeping an eye out for opportunities to earn bitcoin interest and dividends.
#Bitfinex Pays Bitcoin Interest!
Last month I invested 1 BTC (about 1/2 % of my holdings) into Bitfinex to test out their swap contracts. I got a rate of 0.0016% per day and Bitfinex charges a 15% fee on my earnings. From my reading I understood I would earn .047 BTC per month, or if they pay in cash about $30.
Why didn’t I know if I’d receive BTC or cash?
Two reasons: I’m unfamiliar with swaps and their documentation isn’t good. Here are the questions I didn’t find answers to:
- How do they pay (BTC or USD)
- What is the risk exposure? (sounds like the person buying the swap busts and isn’t called out by the system in time to prevent loss)
- What is the likelihood of losing the BTC in the swap? Can losses be partial or are they complete (100%) losses?
- If the risk is that the person buying it busts out, is there a way to diversify the swaps among many buyers?
- How do swaps impact US taxes? I’m assuming holders retain control of BTC the whole time and treat the payment as interest.
- Is the 15% fee taken on my earnings to insure the swap?
#Bitfinex was a Bad Experience
Unfortunately I didn’t enjoy the service. Their user interface was horrible and their documentation almost nonexistent!
I couldn’t tell what was going on, couldn’t figure out the APR they were paying me, couldn’t figure out if they were skipping on paying me sometimes, etc.
I assume I made some small amount of money (maybe less than $10 there) on the $4K I held there for the past month, but like I said their UX is so bad I don’t know!
Here is what the swaps looked like when I was earning interest:
As you can see in the above screenshot those swaps are all earning .005%. Another example of a bad user experience. I had my rate set to something like .01% or .05% / day so I don’t know why I got filled at .005%.
I DO NOT recommend using Bitfinex!
#Where am I Earning Bitcoins? As you can tell from this post I’m not earning bitcoins at Bitfinex. Come learn where I am earning bitcoins.