As Celsius recently blocked withdrawals, there is currently some FUD (Fear, Uncertainty And Doubt) about most of the CeFi (Centralized Finance) platforms such as BlockFi, Nexo, Voyager and Crypto.com (CRO). The objective of this article is to assess the risk-reward ratio Crypto.com (CRO).
Is Crypto.com (CRO) Really Worth It?
The main advantage of Crypto.com application is the cashback which can be earned by using the Crypto.com debit card. As there are multiple options, we will focus on the Royal Indigo, which offers 2% cashback, by evaluating the interest APR (Annual Percentage Rate) that it can generate:
Remarks: As you can see, the reward calculation includes all you can earn with the cashback (assuming you reach the maximum monthy rewards cap), the Spotify reimbursement and the staking rewards. It assume you actually staked an amount of CRO equivalent to the required minimum of EUR 3500. As CRO price varies, the actual amount you staked in EUR might be higher or lower.
Taking into account the assumptions above, the maximum interest per year (APR) that you can expect is 25%. Although it seems relatively high compared to the interests you can earn with USD, it is required to take into account the volatility of the CRO token, which might increase or decrease significantly within one year.
What Are The Risks?
Further to the FUD around Crypto.com (CRO), the CEO of Crypto.com replied as follows:
As usual, there are two sides to the coin:
- One one hand, it is reassuring that Crypto.com has not changed their withdrawal policy, although it is only the situation as of today.
- On the other hand, Kris Marszalek does not give any information on Crypto.com reserves and how the clients' funds have been invested.
To allow clients to earn attractive yields as they do, they need to invest those funds by taking some risks on DeFi (Decentralized Finance) protocols. Therefore, it would be helpful to know the breakdown of the investments they made by having a report like the "Smart Yield" of Swissborg, for example. They could also communicate more in details on the equity and reserves they own, like CZ, the CEO of Binance, did it for Binance & Binance Coin (BNB).
The problem is that Crypto.com does not give such details. Therefore, we can only assume that they make money by using various DeFi protocols based on Ethereum (ETH) mainnet and layer-chains (e.g., Arbitrum) and by leveraging their Bitcoin (BTC) and altcoins positions. However, it is only assumptions.
What Are The Alternatives?
There are not so many alternatives offering 25% APR without some risks. However, it might be worth investigating DeFi protocols on Ethereum rollups like Synthetix (SNX) on Optimism and GMX.io on Arbitrum, which offer staking rewards higher than the CRO's APR without the risks associated to CeFi.
Disclaimer: this article does not contain any financial advice. The information is provided for general informational and educational purposes only.
Please find below a few links to earn a few coins...
