How Does Crypto Investment In Cabital Work, and How Do We Offer Such a High Yield?
Crypto investment with Cabital is an easy way to access the profit and potential of the crypto lending market.
Crypto investment with Cabital is an easy way to access the profit and potential of the crypto lending market.
Ever thought about earning passive income while investing in the booming cryptocurrency market? You might want to consider a crypto wealth management option like Cabital if you’re not quite sure you have what it takes to dive directly into the crypto lending industry. Crypto investment with a wealth management company is an easy way to access the profit and potential of the crypto lending market, which is valued at just under $40 billion.
With Cabital, you won’t need to do extensive research on crypto DeFi (decentralised finance) platforms and moving your assets across liquidity pools while staying safe from scams and fraud. Instead, by putting your crypto savings to work for you instead of HODLing it, you’ll be able to earn up to 12% APY on your savings with Cabital.
Establishing stable and regular passive income streams can be a challenge, regardless of whether your goal is to attain financial independence, save for the future, or to get better return on your crypto assets. The 20-year annualised returns by asset class trends, as seen in the graph below from J.P Morgan, indicate the yield from different traditional investments, investing in the classic 60/40 portfolio (60% equities and 40% bonds) offers a rate of 6.4›% returns.If you’re an average investor, the returns are even worse at 2.9%, barely keeping pace with inflation (2.1%).
And this rate of returns in traditional investment portfolios is expected to decrease further. In a webinar earlier this year, BlackRock strategists predict that it will fail to deliver the moderate returns of the past and even increase investment risk with a possible decrease of 4 – 6% in annualised returns than it did over the past ten years.
There’s a push towards alternative investments in generating returns and higher yields instead of relying on the established asset classes. Cryptocurrencies are an increasingly popular alternative investment option, given their potential for long-term investment. Wealth management platforms like Cabital make it easy to diversify your investments with crypto holdings. Unlike traditional investments, you’ll be able to earn up to 12% APY on your crypto assets by saving with Cabital.
Crypto savings plans work by making money with money. To understand how crypto savings plans work, one needs to first look at decentralised finance (or DeFi). DeFi covers a range of blockchain-based applications that will improve cryptocurrency holders’ returns without intermediaries. One of these is crypto lending, where users of a lending platform can borrow and lend an assortment of cryptocurrencies, where the latter can earn interest on their deposits in the process.
The security of a crypto deposit and crypto loan is dependent on smart contracts. A smart contract is a program on a blockchain that automatically executes an agreement when predetermined conditions are met. In the case of a crypto lending platform, the borrower has to put collateral that’s of higher value than the loan on top of paying high interest. Borrowers include hedge funds looking to buy crypto for trades that can pay out annualised returns as high as 20-40%.
With trading margins so high, the interest rate offered to lenders can be astronomical, with promised yields of over 30% on the conservative end. But with great returns come significant risk. Many platforms provide returns in the form of tokens that depositors receive as rewards for using the platform. However, during the crypto market downturn, users of such platforms are exposed to platform token volatility, where the decrease in value won’t be made up by the yield generated.
Using a wealth management product like Cabital removes the complexity of the user directly participating in DeFi, where they have to constantly track and move their assets across different initiatives (while being wary of scams and fraud) to maximise their returns. Instead, the customer just has to put their crypto assets with Cabital, and Cabital lends these assets to major DeFi platforms with well-established TVL (total value locked) and extensive audit history, such as AAVE and Curve.
Also, with returns in kind based on the currency deposited with Cabital, there’s no risk of platform token volatility because we don’t have platform tokens.
There are numerous factors to consider before investing in a DeFi project, which makes it challenging for a new investor to select the right project. These can range from the specific, like the gas fee (payment to validate transactions), to the broad, like DeFi knowledge, where there’s a sharp learning curve and heavy error implications for the users. Instead of shouldering the burden of judging the validity of projects by yourself, you can leave it to Cabital, as we have a playbook of solid metrics and thresholds to qualify our investment decisions (on top of economies of scale, that further helps us optimise returns and balance risks).
At Cabital, we use quantitative and qualitative guidelines to select which DeFi projects to invest in, which are developed by investment experts with an established track record of working with leading financial institutions. Quantitative guidelines are data-based and qualitative guidelines can include considerations around the financial and economic model of the project. Together, these guidelines form the basis for our decision of whether we should invest in a project.
Besides the above parameters, we also have strict approval procedures before investing in a specific project, like a bank. Cabital’s Risk Committee comprises experts in ALM (Asset and Liability Management), operations, legal, tech, finance, compliance, and more. It’s the Risk Committee that approves Cabital’s investment into new crypto projects and assets.
First, as a stablecoin, USDT (Tether) is safe from price fluctuations as it’s pegged to the USD. Every USDT is backed with an equivalent amount of USD in cash and cash equivalents in reserves. In a recent attestation, an independent accountant confirmed that Tether’s consolidated assets ($35.2 billion) exceed its consolidated liabilities ($35.1 billion). There are also plans for an audit in the coming months. As the value is stable, the market risk and smart contract risks are minimal. It’s also the first stablecoin in operation since November 2014, and with nearly 20 million transactions and a $62 billion market cap, it’s one of the most used coins.
As seen in the graph above, USDT maintains an almost steady rate of 1:1 against the USD, with minor fluctuations. With this stability, holding a part of your crypto assets in USDT is also advantageous, as the USD is rising, with the dollar index up more than 2% for the year to date. The stability of the USD is another reason to diversify your portfolio to include USDT, as it is the world’s reserve currency, making up 59% of the world’s foreign exchange reserves as of Q4 2020.
There have been accusations of Tether illegally manipulating the price of Bitcoin using non-backed USDT. However, a study by Lyons-Natraj found no systematic evidence of stablecoin issuance driving cryptocurrency prices. Instead, stablecoin issuance is driven by arbitrageurs who take advantage of high market prices, and stablecoins’ role as a haven and the reserve currency in the crypto economy.
Due to the lack of cash in the crypto market, there is demand for stablecoins in the crypto lending market, and with USDT being the most liquid and heavily traded of the stablecoins, there’s a greater demand for USDT as opposed to other stablecoins. USDT can be used to buy cryptocurrencies for trades, and the returns on these trades cover the loan and the interest. And thanks to this demand for USDT, you can earn a higher yield on your USDT when compared to other cryptocurrencies.
As a result of the demand for USDT, Cabital can offer up to 12% APY with confidence because we’ve built yield curves for each currency we offer. The base yield is based on the target investment pool reflecting the possible rates we can achieve. This is then compared with similar scale competitors to compute the commercial spread to develop the yields we offer to our customers.
There are no preconditions to investing in Cabital. We know transferring large amounts can be scary, and we want to make it easy for you to see the difference before you commit. You can start with a small investment of any amount of USDT on the 7 Day Fixed Savings plan and receive 12% APY. After watching your portfolio grow and receiving interest on your deposit, you can consider adding part of your Bitcoin and/or Ethereum assets into Cabital as well, where you’ll also be able to earn interest on these.
By keeping your assets on Cabital, you’ll be able to track the dollar value of your crypto portfolio performance. With all your data and your crypto assets in the same place, you can rebalance your portfolio based on market movements or opt to automatically renew your plan (and watch your earnings grow).
At Cabital, we believe that APY should be based on the customer’s deposit, and that’s why we pay interest in kind. We ensure that our customers’ deposits, along with their earnings, are not exposed to unnecessary risks as a means to reduce the strain on the platform. That means no platform tokens, where customers have to hold tokens from the platform to attain higher interest rates. Platform tokens put customers at the risk of market volatility. Should the value of the token drop, the additional interest rate is unlikely to make up for the value lost.
We understand security is one of our customers’ greatest concerns, especially when it comes to their crypto assets.
Given that Cabital works by lending assets for speculative trades, this may sound dangerous, especially given the market risk around the inherent volatility of crypto. That's why even after the initial investment, we incorporate post-investment management into our daily operations. This involves monitoring the daily P&L and yield changes in the project, and once any metrics go beyond our threshold, we will take immediate action. While there’s a chance that our trading team will lose a customer’s assets under management (AUM), it’s well under management. Additionally, we’ve set aside a provision in the case of any extreme unexpected events.
To secure your data and assets, we work with Fireblocks, one of the biggest crypto infrastructure providers with a track record of securing over $400 billion in digital assets for established companies like Revolut. On top of protecting against cyberattacks, internal collusion and human error, Fireblocks also has an insurance policy covering assets in storage, transfer and E&O (Errors and Omissions), ensuring that your assets are safe with us.
You can rest assured that your assets are in safe hands at Cabital. Regardless of whether you're looking to diversify your investment portfolio with crypto, or you're looking to generate interest with your crypto holdings, Cabital's lack of preconditions make it easy for you to get started earning passive income. With no minimum sum, you can start with any amount, and gradually increase your investments.
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