It was a rough crypto summer, especially for crypto lending platforms. Celsius, one of the biggest crypto lending platforms went down the rabbit hole and took some others with it. Many users have started withdrawing their funds from these kinds of platforms while others are still using them. The question is what you are doing.

Are you still using cryptocurrency lending platforms?

The Downfall of Celsius

Celsius had been one of the biggest and most popular crypto lending platforms. Many of you were using it until it all went down the rabbit hole. 

Luckily, I wasn't affected by the Celsius Crash. The reason for it is quite simple. Celsius was not available in my jurisdiction and I was simply not able to create an account. Otherwise, I would have also been a customer of Celsius. 

With this event that came with the Terra Luna crash, more and more users began to withdraw their funds from lending platforms and many of them began to struggle.

The Risks of Lending Platforms

It is the same old song: Not your keys, not your coins. This sums up the risks that are associated with crypto lending very well. You are giving away your coins and expect to get them back plus the interest. In the worst-case scenario, you won't get your coins back because the CEO has disappeared with the private keys in his pockets or the company has made some bad investment decisions with your funds and is going bankrupt. 

These risks are real and you can not exclude them completely. In my opinion, it is not only important to see the risks that are coming with an investment but also to evaluate them. 

Life, in general, is a very risky thing and so are your investments. I would even state that there is no investment that comes 100% risk-free. If there are no risks, you won't be able to make any profit with your investment. You have to accept certain risks and in the end, all of you who have crypto are doing it. Here is why.

Cryptocurrencies in general are risky. Coins like Bitcoin and Ethereum are risky because these assets are extremely volatile. The fluctuations in the prices are so big that most people can not handle them. Stablecoins may not be volatile but they are also risky. Just look at what has happened to Terra Luna. Also, what may happen if Tether can't prove that all $USDT tokens are backed? 

Cryptocurrencies are risky and so are cryptocurrency lending platforms. In my opinion, they are not more or less risky than cryptocurrencies already are. Important is how you handle these risks. So what can you do to reduce the risks?

One of the most important strategies when it comes to investing is diversification. Simply don't carry all your eggs in one basket. That is much safer as you can spread the risks. Let me give you an example of what I am doing.

What am I doing?

Yes, I am still using cryptocurrency lending platforms but I diversify and I would never ever store more than 10% of my overall portfolio on one single platform.

Currently, I am still using BlockFi and CakeDeFi. If you like to know more about those platforms, you might want to check out one of my previous posts with the title "Clash Of The Lending Platforms - BlockFi vs. CakeDeFi"

Well, on CakeDeFi, lending is just one of many services. It is not a traditional crypto lending platform like BlockFi or Celsius as it offers a variety of different services. The main intention of CakeDeFi since its beginning is to offer an easy gateway to the decentralized applications on the DeFiChain like $DFi staking and liquidity mining. Recently, they also introduced a new hybrid product called CakeDeFi Earn.

I am not holding more than 5% of my overall portfolio on each of the two platforms. If one of them shuts down for whatever reason, then I would have lost 5% of my savings. The daily fluctuations of Bitcoin can be higher than that! Don't get me wrong, of course, it would be shitty if I lose this 5% but in the end, I can handle this loss like I handle the daily fluctuations in my crypto portfolio. On the other hand, if I would lose all my life savings at once then I would have a real problem.

My Final Words

These are my thoughts about cryptocurrency lending platforms and the risks associated with them. I hope that sharing my thoughts was somehow useful and entertaining to you.

Of course, I am also interested if you had been affected by the Celsius crash and if you are still using any lending platform. How do you evaluate and handle the risks that are coming with cryptocurrency lending?

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