Popular cryptocurrency exchange Poloniex shocked the crypto industry when they announced that they would be offering an unprecedented interest rate to users looking to engage in USDC and USDT lending, offering interest rates as high as 65 percent APR to customers located in the European Union.
The announcement of this new offering sparked controversy and led many figures within the crypto industry to cry foul, pointing out that it smells like a Ponzi scheme.
Crypto exchange Poloniex offers unprecedented stable coin lending rates; how is this possible?
The announcement of this insanely high APR on stable coin lending came about in the form of a tweet from the exchange on December 17th when they noted that USDT lenders can receive up to 8.5 percent, while USDC lenders can receive a whopping 65.46 percent.
"EU customers: Got $USDC or $USDT? Get interest - Starting now, USDC & USDT lending is open for EU customers."
This potential marketing ploy also comes about as the crypto exchange faces a mass exodus of users, with its BTC supply plummeting over the past year, according to data from Coin Metrics.
"Poloniex's supply of BTC and ETH plummeted after Circle's acquisition, and are now at their lowest levels since early 2016. Check out more insights from our new exchange flows data in this week's issue of State of the Network," Coin Metrics said while pointing to the below chart.
Naturally, Poloniex's tweet generated some buzz within the crypto industry, with many investors questioning how this is even possible.
"Wait a minute!! How are they able to offer 8.5% interest?? That's way above what the market is currently paying".
Although it may seem like a Ponzi scheme at first glance - with some people saying that these interest rates are high even by "BitConnect standards" - it is probable that Poloniex will run these rates for a short amount of time just to draw in new users, before gradually lowering them back to a more reasonable level.
Crypto exchange Poloniex offers 65% APR on USDC deposits, but community cries foul
Published on Dec 19, 2019
by Cryptoslate | Published on Coinage
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