Poloniex allows users to lend their coins to margin traders - but is it profitable?
I used CLAMS for my experiment. I had originally bought the CLAMS to stake, but found out too late that JustDice has a stranglehold on the staking and it feels like it is impossible to mint coins unless you own a lot of CLAMS. Therefore I decided to give lending CLAMS a go to see if I could make any profit.
My experiment lasted 8 weeks. Here is what I found:
- The lending rates are quite low when the price of the coin is low (you can lend for about 0.01% a day)
- However, when the price rises, the shorters move in, and they will borrow CLAMS from you in order to short, and the lending rates rise quickly. During these periods I was able to get 0.38% a day.
- When the lending rates are high, the best strategy is to lend for long periods, to lock in the rate - I chose 20 days. In reality, the trades closed out before that (and hence the loan was repaid), but on average the shorter seemed to keep the loan for about 5-10 days.
- When the lending rates are low, lend for the minimum time possible (2 days). That way you are earning something, but are not locked into a low rate.
- There is an auto-renew facility on the loans, which will automatically put in a new offer when the loan expires at the rate you have specified. Be careful of this. I've seen lots of low rates come up for auto-renewal during periods of maximum shorting. So one minute the lending rates on offer are 0.38% but the next they collapse to 0.01% as the auto-renew loans get released. If you have existing loans during a period of great demand for your coin, switch the auto-renew off, so you can re-offer the loan at a higher interest rate when the loan expires.
- Poloniex takes a 15% fee from your profits. However, in your loan orders history tab (click the "Orders" dropdown, select "My trade history and analysis" and then select "Loan earnings" from the dropdown) they show the profits gross. You need to export all the figures into Excel, work out the 15% fee and then deduct it from your Total to get the net amount.
- After 8 weeks of lending and reinvesting what I'd made, my total CLAMS stake was up by 1%. This is equivalent to 6% per annum. But note if I'd just set everything on auto-renew and left it, I'd have made less. I made what I did because I was vigilant and took advantage of those periods when the loan rates jumped.
Conclusion - it's not spectacular money, but better than a poke in the eye!