# Earning in \$CEL vs earning in kind. What is best?

By Senzacervello | Crypto Vagabond | 31 Aug 2020

If you are into Celsius Network and you are not very into finance, very probably you have wondered whether it is more profitable to go for a higher rate and to earn your interest in \$CEL (native token of the app) or to accept a lower interest rate, but to earn in-kind.

Well, there is not a magic formula to decide what is bets, but there are elements to consider that could guide your way in taking the best decision for you.

In general, whenever you compare two investments in two different currencies, you should not look only at the difference in interest rates, but you also should consider the exchange rate risk.

In other words, one currency could offer you a very appealing interest rate, but if that currency will lose a significant value in respect of the one offering lower rates, you could end up losing money.

Let us take, as an example, the options we have with the “pair” \$MATIC-\$CEL

If you decide to earn in-kind, \$MATIC will give you a good 16.16% yearly rate, but if you go for the option to earn in \$CEL the interest rate can rise up to 22,40% (depending on your ratio). \$CEL alone pays 5,12% per year.

At first glance, it should be a no contest choice given the spread between the rates: 11,01 points in favor of \$MATIC looks huge and even bigger (17,25 points) if you decide to go for the hybrid “earn in \$CEL”

But here is where some magic could happen because the exchange rate between \$MATIC and \$CEL is not fix. So, one of these 3 scenarios are waiting for you in the future:

1. \$MATIC gains value against \$CEL

If this happens, earning in \$CEL could prove to be a bad choice. The more \$MATIC appreciates against \$CEL, the more you lose in terms of potential profit. In this scenario, the most profitable choice would be to earn in-kind and compound on the more valuable currency. Higher yields and higher capital gains. The earn in \$CEL option would pay you out with a less valuable currency and you would compound at a much lower rate

1. \$MATIC loses value against \$CEL, but not more than 11%

In this case, you should probably go for the “earn in \$CEL” option. The additional boost in yield you’re going to get (6,24 points if you are platinum) would cover the capital loss you are suffering in \$MATIC and you would get a stronger currency compounding at a good 5,12%

1. \$MATIC loses value against \$CEL over 11%

In this case, you would better consider a swap to another asset. With \$MATIC losing so much against \$CEL, not even the option to earn in \$CEL would save you from a capital loss

Edit: I thought to add a consideration coming from a comment I received from a Celsian friend. If your main asset loses value against \$CEL, you can always cut the purchasing price buy buying the dip. But you must be careful because price cutting can lead into a deep hole if and when the downtrend is prolonged. You might be in need of significant resources to follow dip after dip. Again, you can set a stop loss somewhere to avoid to sink completely. Not talking of \$MATIC in particular, of course

What above is strongly dependent on the time frame of your observations. Short term volatility is pretty high in crypto and a bad week or two can be an acceptable “loss” if your plans are to hold in the long run, but you should keep an eye on trends in order to reassess your holdings and go on increasing them in value.

Do your own math for the pair(s) you hold within Celsius and never forget that you must take care of your investments no matter they are huge or small. Simply depositing, clicking a button and forget about it could bring you unpleasant surprises. The Celsius team is doing a lot of job on your behalf, but you must do your part.

If you found this useful and you would like to join the platform, you can download the app here, use my ref code 15691399fa to get an additional 20 USD (in \$BTC) after you have deposited your first 200 USD or more.

Senzacervello

Crypto enthusiast. One day fiat will be only for collectors

Crypto Vagabond

My life in cryptospace among blockchain games, NFT, promising projects and whatever catches my attention. In this blog I only write my own opinions and they are not financial advises for any reason. Always do your own research and never put at stake what you can't afford to lose

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