Centralized Crypto Lending Companies Are Giving Ponzi Impressions

Banks are centralized, banks are greedy, and the banks are filled with a lot of shady activities but most times we forget that the people that run these banks are humans. Just like the people that run centralized crypto exchanges and platforms. Most of the people involved in crypto or have a crypto exchange are sometimes accounts, old bankers or people that were supposed to work in the bank but decided to focus on the new financial technology which is cryptocurrency. Most of them are not decent, they are all money mongers that also want to make quick money off the new technology. We can see that as the crypto lending platforms are crashing.

These platforms take these investors money to invest on other things so they can make huge money, without having any form of insurance or whatever. Risks you wouldn’t take with your capital, but you opted for a lower risk because you believed that these people will lend your money to regular investors. It’s all looking like a lie because if you use Celsius, you will understand what I am trying to say. If you want to borrow money from these platforms, they always make sure you leave a crypto collateral twice the value of what you want to borrow. This way, when you are unable to repay your loan, your collateral will be used.

They request for twice the value because the crypto market is volatile. You might be wondering, why use twice the value for collateral before you can collect a loan, when I can just take the money from my coin. Well, cryptocurrency is very volatile, you can have 4 Ethereum at $1,000 each making it $4,000 total value. Then you need $2,000 for an emergency, you can either take out that $2,000 from your $4,000 ETH portfolio, or take a $2,000 loan from crypto lending platforms in stablecoin. This is because, nobody knows the future movement of the market. You can sell 2 ETH get the $2,000 use it for whatever you want to use it for, then the value of ETH goes 3X, you won’t spend the same $2,000 in buying it back, you will have to spend 3X the value.

This has made people to consider crypto lending platforms. They can take the loan in StableCoin, and repay the exact amount value in USD. This is what we all thought, or rather, this is what I thought lending crypto platforms do. But it’s seems like we have all been fooled. According to the ex Celsius employee who is suing Celsius for running a Ponzi scheme, he claimed that Celsius use these customers assets to inflate the price of the native token, CEL.

Rumor has it that most crypto lending platforms are not fully insured, these customers assets are totally exposed to the market and its risk. When it goes good, they take all the profit, but when it goes bad, they go bankrupt, putting their customers funds at loss. This was what we were told that the banks do with our money. They take big risks with our money and give us a penny, unfortunately crypto lending platforms are doing the same but without investment strategy to help backup these funds should incase their investments go south.

The Terra Luna case has exposed them and they are all falling like dominoes.

Posted Using LeoFinance ^Beta