Hey all, I’m considering moving about half of my remaining portfolio into a centralized stablecoin lending platform like CDC or NEXO for 7-9% APY and was wondering what sort of events would have to happen for USDC to lose its peg to the USD?
I know nexo has insurance for this program, and USDC is making a concerted effort to be damn near 1:1 backed, but with the threat of prolonged recession/possible depression, I’m feeling hesitant. I ultimately want passive income and this is better for re-buying later as well since it’s earning more money than I’d be able to do in fiat and it’s technically crypto.
I know that lending is essentially letting the entity use your money in exchange for interest and it’s almost like a high yield savings account, but what happens if the coin de pegs while you’re lending and the institution is unable to pay you back? What sort of events can cause fluctuations in fiat collarerized stablecoin price?
Furthermore, we know that rates tend to decrease over time as more people use these platforms and it becomes harder for an entity to maintain higher payouts. Does anyone know if you’re grandfathered in to a rate when you start or they automatically change over time no matter when you’ve entered the agreement?
TL:DR- Is stablecoin lending really secure in the face of widespread recession? Why and what sort of precautionary measures should one take before putting a substantial sum in a program for the short-mid term?