TD₿: Don't Get Rekt by Andy Edstrom
TL;DR On the road to long-term financial freedom, unlevered cold storage and self-custody are your allies.
Hey Bitcoiners,
Summer 2022 will forever be remembered as the time when the crypto lending platforms blew up.
Since Terra Luna crashed and the market volatility has increased, we have heard the news of crypto lender after crypto lender being on the brink of insolvency.
Celsius was the first one to drop. They are now rumored to be enlisting more advisors to help with potential bankruptcy.
Voyager Digital then followed and just issued a notice of default to hedge fund Three Arrows Capital for its failure to pay a loan valued at over $650 million, putting into question Voyager’s own insolvency.
And now lending platform BlockFi is showing signs that it is also struggling in this challenging environment. They announced a $250 million credit facility with FTX which would effectively protect its customers’ deposits while wiping out BlockFi’s existing shareholders.
FTX’s bailout of BlockFi would help BlockFi live to see another day, but it also protects FTX’s own business because if BlockFi fails to protect customer deposits, then that would be another huge blow to the broader “crypto” industry.
These unfolding events serve to highlight the risks of holding bitcoin on these lending platforms that often obfuscate how they generate the advertised yields given to retail investors.
Andy Edstrom wrote this short piece over a year ago that warned retail investors of the risks of leveraging their bitcoin holdings (03/08/2021).
It’s easy to get wrapped up in the bull market and take warnings like Andy’s as fear-mongering at the time, but there’s a reason Andy was warning retail investors about this eventuality. In his long career managing money, Andy has seen how leverage can destroy portfolios.
Given how early we are in Bitcoin’s adoption cycle, avoiding leverage and holding spot bitcoin in cold storage is the easiest way to ensure you won’t blow up your stack before hyperbitcoinization.
Tick tock next block,
Cory Klippsten
P.S. - Andy Edstrom leads Swan Advisor Services which is THE platform for Financial Advisors. Get early access here.
Sign up for Swan and receive $10 in free bitcoin today.
Quote of the Day
“Banks started as a safe place to store Gold then leverage created fiat currency. Bitcoin started as a safe haven from banks and leverage created the crypto market. Short term fiat & crypto create buying opportunities for long term holdings in Gold and Bitcoin - lesson over.” - Simon Dixon, Founder and CEO of BnkToTheFuture
Meme of the Day
I especially liked your previous article, that links to an in depth rebuttal of critiques of btc, the rebuttal was buy Tomer Strolight