What is the Bitfinex lending product?

In the cryptocurrency asset market, aggressive investors may have the need for “borrowing to buy coins” and “selling borrowed coins,” while conservative investors may choose to lend out their cryptocurrencies to earn interest. Bitfinex is the largest cryptocurrency lending market. As of January 4, 2023, the daily trading volume of the Bitfinex lending market is 130 million USD, with an average daily lending amount of 410 million USD.

In order to provide more stable financial products for investors during bear markets, Pionex has launched the Bitfinex lending product based on the Bitfinex lending market. Users invest their funds with Pionex, which then lends the funds out on the Bitfinex lending market and distributes the loan interest to the investor.

Advantages of the Bitfinex lending product

Since the Bitfinex lending product launched by Pionex is based on the Bitfinex lending market, what are the advantages of investing in the Bitfinex lending product from Pionex compared to directly lending on the Bitfinex lending market?

Compared to manual lending, investing in the Bitfinex lending product launched by Pionex has the following three advantages:

1.More intelligent order placement algorithm, higher financial returns

In the Bitfinex lending market, borrowers and lenders of funds submit loan orders to the order book. For example, in the figure below, the data in the red box represents that a borrower wishes to borrow 14.9 million at a daily interest rate of 0.077%, the number of loan days is 120 days. The data in the yellow box represents that a lender wants to lend 321.2 USDT at a daily interest rate of 0.027878%.

If the user personally lends funds on bitfinex, it is difficult to determine an appropriate interest rate. If the interest rate is set high, it is very likely that the funds will not be able to be lent out for a long time to obtain income. If the interest rate is set low, although the funds can be lent out quickly, it is difficult to obtain considerable income.

According to the supply and demand of funds in the lending market and the status of pending funds in the order book, Pionex intelligently adjusts the lending rate of funds, and automatically increases the lending rate of funds when the demand for funds in the market is strong and the supply of funds in the market is insufficient.

Before the product was launched, Pionex conducted a full test with its own funds. The orange curve is the income obtained by Pionex’s intelligent order algorithm, and the green curve is the income obtained by using Bitfinex’s official intelligent order robot Lending Pro. Through comparison, it can be found that the Bitfinex loan product launched by Pai.com can obtain higher interest income after adopting the smart pending order algorithm.

2.Stricter fund management to avoid long-term idle funds

Although Pionex’s smart pending order algorithm can automatically obtain a higher interest rate, it does not simply set the loan interest rate very high. When it detects that the market sentiment is depressed and the interest rate is expected to fluctuate steadily in the near future. The algorithm will automatically lower the lending rate of funds to avoid long-term idle funds without income.

3.More controllable borrowing time to avoid long-term occupation of funds

If a user places an order manually on Bitfinex, it is inevitable that the funds will be lent for a long time due to operational errors and other reasons. For example, in the above example, if the user lends funds directly to the counterparty, the funds will be occupied for 120 days:

Pionex’s Bitfinex loan product has two terms of 14 days or 30 days, and the investment principal and interest will be automatically redeemed back to the account when it expires, avoiding long-term occupation of funds.

Risks of Bitfinex Lending Products

Although Bitfinex lending products provide a solid interest income, there are still some risks.

1.Risks of the Bitfinex platform itself

Bitfinex is currently the largest lending market. According to the data of portfolio.nansen, the BTC holdings on the bitfinex platform exceed 50% of the total assets, and the BTC holdings are the second largest centralized platform. However, in extreme cases, due to market liquidity, regulatory risks and other reasons, the Bitfinex platform may face operating risks, and even cause users to face losses in investment principal and income.

All the assets you subscribed for “Bitfinex Lending Product” will be invested in the lending business of the Bitfinex platform. “Bitfinex Lending Product” will do its best to help you realize your income, but your investment may still face losses due to the Bitfinex platform.

2.Market demand for funds is sluggish, and interest rates have been low for a long time

Judging from the data from 2020 to the present, the lending interest rate is cyclical, with a period of about 3 months, and the lending interest rate will not remain low for a long time. Recently, due to the Fed’s interest rate hike, the USDT borrowing rate is also gradually rising.

The rate of return of “Bitfinex lending products” is floating, and your final income depends on the actual income of the asset lending business on the Bitfinex platform. Pionex does not make any commitment to your rate of return. Your final return will be based on the amount returned to you by Pionex on the due date.