Gemini appears to have launched GUSD on its Earn product in June 2021, beginning with an annual return of 7.4%, the highest of any coins. The rate of return available on Gemini Dollars was often the highest available for the dozens of tokens available for lending through Gemini Earn, as seen in archived links to Gemini Earn’s webpage. “I was seeing the yield that they were offering for some of their coins, specifically for the GUSD coin,” explains Sarah, who requested that Forbes use a pseudonym for fear of blowback from her employer. “Everything was so marketed as GUSD being this safe, stable asset that had one to one backing,” says Sarah, a Brooklyn-based investor who lent out $20,000 of GUSD through Gemini Earn beginning in January, when Gemini advertised the annual return on Gemini Dollar at over 8%. Since November 9, around the time of FTX’s collapse, GUSD holders have exchanged some $250 million worth of their Gemini Dollars back into dollars or other cryptocurrencies, according to data from CoinMarketCap. Previous filings will not be affected.ĭemand for Gemini Dollars has fallen off a cliff. Last evening, on December 15, Gemini emailed its customers to announce an update to the dispute resolution clause of its terms of service, to move future disputes to a separate arbitration forum. We don't even have an audit here.Gemini insists it has no obligations to those investors who bought Gemini Dollars and lend them out through Genesis. Lehman Brothers passed an audit shortly before their collapse. Personally, I've used these services but only because I can tap other assets in the worst case. These types of Black Swans don't happen often but they do happen and when they do, the impact can be devastating. I wonder if people were burned by that or could have been burned by it, were it not for the trying to protect their reputation. These are startups and BlockFi, at least, has already made a number of clerical mistakes, like sending massive amounts of BTC by accident. We're essentially relying on reputation and it's unclear what would happen in the case of bankruptcy or even what their liability is for mistakes on their end. It would be nice for Gemini and BlockFi to spell out exactly what they're doing, instead of vague and broad generalizations that they give us now. I see your point but, also, we don't know how they do their accounting for sure. The main calculation for borrowing indefinitely on Bitcoin for me would be that I would have the expectation from year to year to average at least 7% on my Bitcoin and that would cover my loan and the rest would be profit. That's a big misconception in the world of lender borrowers of the crypto world where some of the biggest and worst volatility downward for crypto have been some of the best days for the likes of Celsius Network and others.īorrowing exists in all markets, and people that intended on selling their crypto for profit after a big dump may well rather borrow on the crypto anticipating it rising again later and conversely if your cryptos had a huge pump and your capital gains and subsequent taxes would be too much because you've done too well too quickly and would have short-term capital gains taxes which are at a higher rate than holding at least a year here in America then you would also want to borrow on your crypto. I suspect there are possible scenarios where something catastrophic happens and all of a sudden ur GUSD is worthless.Īny help/clarification would be so so appreciated, thanks! If there was no GUSD and it was solely USD earning 8% interest FDIC backed I would have no questions at all. Sorry if the post is a little pessimistic for the subreddit, the whole concept just seems too good to be true to me. Last question - if I was invested in GUSD trying to earn interest what are the possible scenarios/situations where all of a sudden my money is at risk and I lose the chance to take it out (like Madoff). I have this slight suspicion that god forbid the crypto market crumbles in the span of a day or two that there is a chance you won't be able to swap out all your GUSD to USD and you lose your savings if the crypto market never bounces. The thing is, it says that GUSD is not backed by FDIC which was a red flag to me (despite saying their balance sheets saying they have enough USD to back GUSD). Gemini says that the USD you deposit is FDIC backed, but then they require you to convert it 1:1 to GUSD to earn that 8% interest. Naturally, I was a little skeptical at first and had a few questions. Was doing research and saw that the interest rate for GUSD is about 8% per year, which is insanely high compared to savings accounts.
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