When it costs 5x to get your rewards as they’re worth, what is your liquidity?
So fellow humans, you are holding ETH. Congrats! People are starting to realize what ETH is capable of (most people’s money isn’t Turing Complete….tulips certainly never were) and people are getting excited about it.
Now…here’s a challenge: You’ve invested about $200 worth of ERC-20 tokens in a Decentralized Finance application. You have pending rewards of about $5 after a week (an incredibly rate of return, mind you). Is it worth it to collect them when the gas fees to do so must be paid in a token that is at an ATH?
The dynamics of this question are VERY CLEAR to anyone who has been doing (trying to do) ETH-based DeFi over the past few months.
For those of you who haven’t delved in DeFI yet, and are still into rote jtoken speculation, no worries! It’s obviously not for everyone.
But to understand what value lies here…this video about a DeFi project (not ETH-based) notes the thing.
You can watch it, but he gets really excited when explaining this (note: I have not yet invested in Celsius).
The point he makes is very valid: Your traditional securities (stocks and bonds) that you keep at a brokerage are being used as collateral for loans charging interest. You don’t get this money, the brokerage does. You only get the raw gains from your investments, not the interest on the value they represent. This is a LOT of value. Especially when compounded over time.
Decentralized Finance hopes to return that values to users. If you haven’t got on the train yet…look into yet.
And *then* you’ll realize what ETH at an ATH does to the space.
Back to the challenge: You’ve invested about $200 worth of ERC-20 tokens in a Decentralized Finance application. You have pending rewards of about $5 after a week (an incredibly rate of return, mind you). Is it worth it to collect them when the gas fees to do so must be paid in a token that is at an ATH?
Is there some place else that allows this to work with reasonable fees?
I think the answer is yes, and I’ve been doing so. I’m wondering what else y’all have found so far out in the Crypto Wild West of 2021.
Cheers! Happy trading! Patience beats passion, as I learned again yesterday. (d’oh!)