LENDING FLEXIBLE & WISDOM OF THE FINANCIAL MODEL “MAKE SOMETHING AND RUBBER”!
I. What is Lending?
A Lending model will usually operate in the following form:
Step 1: You use a type of Crypto base (Commonly known as base coin, base coin, intermediary coin … like Bitcoin/Eth … These are large, official, highly liquid Crypto types) buy a type of Crypto new Lending mechanism. Here most of them only accept Bitcoin and Ethereum.
Step 2: You receive the corresponding amount of Crypto Lending, and have 2 options: Hold and wait for the price to increase, or Lending to receive monthly interest. (Depending on the mechanism & orientation of the floor owner, the ratio, operation and deployment method may be adjusted differently)
Step 3: If you choose to hold and wait for the price to increase, then you just have to hold it, bring it to the floor, see the appropriate price, then put it up for sale, if the order is matched, you will receive the money.
Step 4: If you choose Lending, the number of Crypto Lending coins will be converted to USD, you will receive a profit division for each day/week/month based on the converted USD amount, usually ranging from 30-50%/month ( payback after 2-4 months).
Step 5: Or you can choose both.
II. Why is the price of Crypto Lendings always increasing?
The appreciation of currencies depends mainly on the principle of Supply – Demand.
If the amount of DEMAND is greater than the SUPPLIER (BUY is greater than SELL) and persists for a period of time, the price will tend to increase.
When you join the Lending model, Investors who receive money regularly in a certain period of time will tend to share it with friends and relatives to buy in, increasing DEMAND.
Leaders will continue to support market development & support new investors, increasing DEMAND.
The application of the MLM/Affiliate model to market development is a very smart move, helping the bookie to actively control & continuously develop DEMAND, ensuring to maintain a large buying force (Instead of dropping demand). emerging for the self-developed market).
On the other side, most speculators tend to sell out when they reach the appropriate profit threshold, creating a large SELL force causing the currency to depreciate.
How to handle this phenomenon?
Very smart, the floor owner will say: “Thong, don’t sell, give me a loan and I’ll pay you interest”. The more Lending people, the fewer sellers, reducing the SUPPLY significantly.
The cleverness of combining Lending with MLM, helping to increase DEMAND & control SUPPLY, this is the basis for most Crypto Lendings to easily increase in value over the past year!
III. Where do Lending brokers get money to pay interest/fixed profit to Investors?
First, it should be clearly established that there is no Crypto type born with the function of automatically generating profits for Investors. Profits come mainly from smart floor owners who cleverly apply financial principles to the Business model.
Where does Investor’s fixed profit/profit come from, and how can he pay more than 30%/month (while the Bank can only maintain 6-7%/year)???
The secret lies in the “exchange rate difference”.
+ January: You spend 1btc ($1,500) to buy 1,500 Crypto Lending coins (1$/1 dong). And then you give Lending back 1,500 VND. The amount of Lending will be converted to USD, and you will receive interest on the converted USD.
+ February: The price of btc increased from $1,500 to $3,000. You receive interest for the first month: 1,500 USD x 30% = 500 USD
+ March: The price of btc increased from 3,000 to 5,000 USD. You still receive regular interest: 1,500 x 30% = 500 USD
– If you buy 1 btc, after 3 months you can get: 6,000 – 1,500 = 4,500 USD
– As for Lending, you get regular interest: 5.00 x 2 = $1,000
So, where do you get your fixed interest/profit from? While no Business activities exist during the operation of the Lending model?
The answer is: the fixed interest/profit you get can be taken from your principal, and taken from the growth profit of the base that you should be entitled to, but you refuse, handing it over to the exchange. Lending and feel happy because they quote part of it (which should be all mine).
IV. Lending vs Crypto Platform, Value
It is similar to the case of government clearance, which will usually arise in two directions: agreement & coercion.
If people agree to the compensation mechanism, everything will go smoothly, quickly, pleasing to both parties, and vice versa, often leaving unintended consequences.
Similarly, the increase in the price of Crypto Lending coins does not come from intrinsic value like foundation Cryptocurrencies, born with a clear purpose and mission, but through smart financial techniques.
In other words, Crypto platform will not be able to grow as fast & as sudden as Lending, and vice versa!
V. Lending vs Ponzi
Most people when it comes to Crypto Lending model, will immediately think of Ponzi because these models often use MLM/Affiliate method to stimulate demand.
However, if understood correctly, the operation of these two models is not the same:
– Ponzi: Take money from the latter to pay the former.
– Lending: Take the investor’s profit, cut a part and return it to the investor.
The Ponzi model without the following people appearing continuously, the system will be easily broken. But with Lending, it is different, the “exchange rate difference” can be offset in case the following number of people does not come in as much as expected.
(And conversely, the “exchange rate difference” also easily collapses the Lending system regardless of how many people later enter.)
– Ponzi: Cook a pot of boiling water, put in 1 toad.
– Lending: Put the toad in a pot of water, then boil it slowly…
One thing I really want to mention about the similarities & differences of Ponzi & Lending is the psychological factor.
With the Ponzi model, the floor owner is wrong anyway because the latter pays the former without receiving the consent of the participants.
But Lending is different, the floor owner takes away the actual profits of the players openly, and is accepted by the market, acclaiming for its intelligence.
BECAUSE. What are the possible risks of the Lending model?
Regardless of risks from objective factors such as Legal & Technical, here are some risks that may arise during the development of a Lending model:
a. The mind of the house: The first risk comes from the seriousness of the floor owner. If they have bad intentions from the beginning, the following activities will take place:
i. Smash the floor: When they reach the expected profit threshold, they will crash the floor, disappear, end the game regardless of the consequences arising.
ii. Strong discharge: They still continue the game, and are still the ones who actively control with a very large ownership rate, capable of causing inflation and serious currency devaluation, just need to go through 2-3 rounds. strong community.
An example for you to imagine: The total supply of Crypto Lending is 100 million, they spend 9 million to run the MLM/Affiliate system & push the coin’s price. (And the floor owner owns the remaining 91 million)
If the exchange owner actively releases 9 million VND in his possession, the amount of assets you invest in this Crypto Lending will lose ½ of its value within a few notes.
And of course, if not high enough, they can continue to discharge until you can’t stand to bite your teeth to cut your losses…
b. Exchange rate fluctuations: Lending patterns have been healthy throughout the past time, largely thanks to the strong growth wave of the entire Crypto market. Specifically, the growth of base coins, base coins like Bitcoin/ETH…
However, on the other hand, when a large number of new investors join later, the exchanges receive Lending at extremely high rates. Just a serious decline in the value of the deposited base currencies for a long enough period of time can cause a liquidity imbalance, having a major impact on the financial structure & business model.
VII. What’s The Worst & What’s The Best That Can Happen?
1. The floor owner is having a huge profit surplus, through the sudden price increase of Bitcoin over the past time.
With a large amount of profit, they can deduct a part to build the ecosystem (based on the available community), and at the same time cut the profit & affiliate mechanisms, both to create a balance and to create value. commensurate with the price of the currency.
2. The floor owner stops the project, returns the money to the Investor (in USD of course). Investors will be happy because some people have eaten enough, others get all their money back. The house is also happy, because the money is returned in USD, and the difference in USD/BTC is all I enjoy, thanks to them.
3. The floor owner eats enough, actively knocks down the project.
4. Base rate fell, the whole Lending model had problems.
VIII. Does anyone who does the Lending model will be successful?
Lending model is only successful, when the price of Crypto Lending is blown & grows continuously. And this only happens, when there is a large enough & sustained buying force.
When the market has too many types of Crypto Lending similar to each other, inadvertently causing the buying power to be scattered, no longer as concentrated as at the beginning of the trend.
Just rekindle a new trend, immediately the buying power will be seriously reduced, greatly affecting the entire Crypto Lending model, not just any coin/exchange.
1. It takes 3-4 months for you to be “returned in full” (I don’t like the concept of “payback after 3-4 months”, the concept of payback should only be used in investment models. where you know what people are actually doing with their money to create value), meaning in those 3-4 months you’re trading risk for opportunity. Be ready mentally, and make sure if there is a loss it does not affect the life of your family.
2. After 3-4 months you are “returned to the original part”, the new people in your group will begin to be paid, and then you should note note 1 again, change your family phrase to “family” friends & relatives”.
So if possible, participate in personal perspective, profit and loss. Don’t shout too loudly, it’s not good for your health.
3. Ask yourself a few questions, before deciding:
– Instead of investing in Lending, I bought the base by myself, which one is more profitable? (Remember, in terms of both PROFIT and RISK, if the PROFIT is a little less, but the RISK is a little lower, it’s worth considering).
– In case the market reverses downward, if the base copper price drops by 1/2 continuously after 6-12 months, where is the source of revenue for you to “return the original part”?
Note: Ponzi scheme is a game of borrowing money from one person to repay another. Borrowers offer high-yield guarantees to lenders and advertise with them examples of past high-yield returns to attract lenders. Lenders attracted by high yields even refer newer lenders. In this way, borrowers are increasingly able to borrow larger amounts of money from more new lenders.
For example, a Ponzi player introduces someone to an investment plan that promises high returns (but actually doesn’t) and then offers this person a loan and promises to pay high interest. Next, the Ponzi player goes to other people and advertises to them about the virtual project and about the fact that person A has joined the project and received a high profit. These people generate a high profit motive by lending money to Ponzi players. This guy uses a part of the newly borrowed money to be paid to person A as committed and most of the rest is pocketed. He continued to find more new people to continue the trick. Person A himself, when receiving a high return and interest, can continue to lend to the Ponzi player and also refer many other people to participate.
The Ponzi game, of course, can’t last long because the lenders are not many and then the information about who plays the Ponzi game will gradually be revealed. The end result of this game is that the mastermind will escape, leaving many lenders to lose money.
More detailed articles about Ponzi, you can refer to.
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