How can we say: “We don’t really care if the custodian/OTC platform holding our clients’ assets implodes?” and get away with it? The answer is a lot simpler and not that surprising for those who are familiar with our bottom line.
Crypto lending and crypto staking seem like the safest possible bets to make in the crypto market. Take a more or less marquee token, stake it and get interest. The token isn’t expected to plummet by any margin more significant than the usual crypto bear whirlwind, and safe returns were generated just by HODLing. They are, of course, not nearly as safe as advertised.
These activities generally involve adding your crypto assets to the holding company’s balance sheet. In the case of crypto lending, it’s kind of clear where the money goes. In the case of staking, not that much. Either way, both of these activities involve taking your assets out of cold storage and essentially placing them on the market. It’s clear why this is a far step down in terms of security and safety, and these two were always, and remain, more important of an offering to us than extra returns.
AAVE, UNI and COMP are examples of tokens we offer where our customers obviously wanted to make good on the underlying lending ecosystem. But we had to stick to the aforementioned bottom line and sort of curb interest in this regard.
By holding these tokens alone, investors are still getting the benefit of that ecosystem. As it grows, the token’s value increases. Of course, investors always want more. It falls on us to sort of act as a risk manager and turn our investors away from what might be a risky decision even when it doesn’t seem as such.
We can use Celsius’ uncomfortable example, but really, we are strapped for choice when it comes to these. The project starts going under, the company halts withdrawals. In the case of trading platforms like FTX, precisely the same happens, just with an array of tokens as opposed to one.
Our customers aren’t risking this because their assets aren’t on the custodian’s balance sheet. They’re held in cold storage for several reasons, and this is very much one of them. Should one or more custodians go under, or even the storage facility, the assets remain secure.
We don’t exactly have to look far to find an example of how this is an issue outside of crypto, either. Bank deposits in private banks are probably what we’d mention right away. During “times of peace”, all is well. Depending on the kind of savings plan you have with the bank, you might be earning interest on money that you can still withdraw whenever you want, only canceling the plan.
Should the bank encounter trouble, however? We can look to Venezuela, we can look to Argentina: everything’s great until it isn’t. When the entity holding someone’s money or controlling it in some form gets a liquidity squeeze, all the comfy reassurances go out the window. It can go from the private sector all the way up to the state level, when a nation tells its citizens: sorry.
We’d like this to be different in the crypto market, but it isn’t. It’s the nature of financial markets, but also human nature, in a sense. So just as armed guards are used to deter otherwise well-meaning individuals from checking what’s in a depository, our cold storage oriented approach deters custodians from tampering with our customers’ assets.
It’s because of this commitment that we can continue to claim to offer the World’s Most Secure Digital IRA. In truth, our customers might as well have slept through a lot of the havoc mentioned above, and there’d be no reason to disturb that sleep. Our mission is to ensure this remains the case whatever weirdness the crypto market decides to pull next.