Crypto Academy week 10 - Homework post for @fendit

IINTRODUCTION

The lesson by professor @fendit has been a splendid one. It’s definitely a good idea to make your money work for you rather than stacking them up for show. That said, in this post I will complete the task given by the professor.

Let’s get into it...

Which is your risk aversion? Which of these products you find the most appealing and why?

After putting all the factors into consideration, I would say that my risk aversion is Moderate.

I say this because I generally like to play it safe but I get into risky investments especially because of the fear of missing out. I initially didn’t want to get into crypto because of the risk and volatility of the market but I got in because the gains looked promising.

I haven’t been in the crypto business for long (4 months) so some of the products mentioned are new to me. However, I know that from what I learned from the lecture, I would choose Fixed Savings right now. Maybe I would change my mind in the future but let’s go with Fixed Savings now.

I choose the Fixed Savings product because it’s basically risk free and inculcates the habit of saving in traders. Flexible savings isn’t really saving if you can pull out your funds anytime your wish.

Explain in your own words fixed and flexible savings, high risk products and launch pools

Fixed savings

Fixed savings is as the name goes. In this type of savings, the trader agrees to lock the funds for a given period of time while accumulating interest. Before the agreed period, the trader cannot have access to the funds. The interest rates in fixed savings are encouraging to traders and that’s why a lot of people go for it. Let’s give an example with USDT:

The picture above shows a USDT fixed savings plan for a period of 7 days and Annual Interest Rate of 6.31% if the subscription is constant. Putting in 100USDT in a locked vault for a period of 7 days doesn’t sound that hard especially if you make an interest of 6.31% from doing nothing.

While this option might be suitable for long-term investors, short-term investors might not like the idea.

Flexible Savings

One can say that this is a more friendly type of savings. In flexible Savings, the funds committed are not locked and therefore can be redeemed anytime but at a cost. The interest rate for this type of plan is low compared to that of the Fixed Savings. Let’s check it out with an example:

As you can see, the interest rate per annum for a flexible savings plan is 5.80%. Comparing that to Fixed, it doesn’t seem appealing to me.

This type of product is suitable for people that like to have control of their funds. Also, funds committed can be redeemed in times of emergencies.

High Risk products

High risk products are not for the weak of mind. These types of product are for traders that have high risk tolerance and are not scared of losing. Binance offers three high risk products as I’m going to show below:

1. DeFi staking

Decentralized Finance(DeFi) is used to explain financial services that are done on a blockchain.

Binance makes DeFi staking very easy for its users. Instead of going through the hassle of trading with private keys, binance offers users good DeFi staking deals that are accessible with a few clicks. However, Binance displays a risk notice for anyone that chooses to participate in DeFi staking.

Binance offers a flexible DeFi staking platform. This means that you can pull out your funds when you please. However it is important to note that the minimum earning period is one day and it starts to count at 0:00 UTC on the day after fund commitment.

2: Dual Investment

What makes this type of investment special is that you get to earn in two different cryptocurrencies. Interest accumulated here is based on the settlement price and the strike price. Let’s define those two terms...

Settlement price is the price of a given asset at the end of a contract during a given period of time

Strike price is simply the price that an asset was obtained for according to a contract.

The binance dual investment product can be BTC-based or Stablecoin-based (with USDT or BUSD). The BTC-based investment let’s btc holders commit their BTC while the stablecoin-based let’s traders commit USDT or BUSD.

In this type of investment, the investor earns BTC if the strike price is higher than the settlement price. However, if the settlement price is higher than the strike price, the investor earns in Stablecoins.

3: Liquid swap

This is yet another High-risk product offered by Binance. This product works unlike the normal order book but with what binance refers to an Automated Market Maker(AMM). An Automated Market Maker provides liquidity to assets through a given formula. It is automatic and does not require another trader to fulfill a trade. Rather, trades are initiated by Smart contracts.

There are different liquidity pools in the Liquid swap product. Each pool consists of a pair of currencies that can be swapped easily.

An investor can earn from this product by providing liquidity as a Liquidity Provider. However, there is great risk involved in this as Liquidity Providers are prone to Impermanent Loss. Binance even issues a risk notice for beginners.

Launch pools

Launch pools are getting more popular as the years go by. The concept of Launch pools is quite easy. A trader is rewarded for providing liquidity to a given asset in a process known as Farming. I consider this product as safe because at the end you get back your committed coins and the newly farmed tokens. A win-win.

Show and give detail on how to set the investment you chose in Binance.

I already mentioned that I prefer the Fixed Savings product. Now, I would show how to set the investment.

• On the Binance app, click on “Wallets”.

• Select “Earn” and click “Buy products”

• You will be taken to Binance Earn. Next click “Fixed Savings”

• Select a coin. I chose USDT.

• Select a duration, Choose Lot amount, agree to the terms and the click “Transfer Confirmed”

Conclusion

Discovering these ways of making my crypto work for me has been a real eye opener. I think it’s a great idea to put crypto holdings to work. Small interests always amount to huge returns in the long run.

Special thanks to @fendit