Daily Briefing: A Freeway to Lose Money
Another centralized yield provider has frozen customer withdrawals in what can only be described as a clear and documented pattern.
- Another centralized yield service—this time Freeway—has closed customer withdrawals.
- With so many of these companies folding in the last year, one starts to wonder if this is the norm rather than the exception.
- At this point, centralized yield providers have generally failed to demonstrate any reason that they should be thought of as trustworthy stewards of customers' money.
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On Sunday, another company offering outsized yields on crypto made the headlines after it closed redemptions and left thousands of customers unable to access their funds. The company, called Freeway, offered users “Supercharger simulations,” a buzzy name for what are essentially deposits to an unregulated prop trading firm. Freeway sold these bond-like products, telling investors they would make a smoking 43% APY after the company put their money to work using “cutting-edge quant trading tech.”
A Recurring Problem
As you’ve probably already realized, sustaining these kinds of yields during the current crypto winter is pretty unrealistic. Freeway put out an update Sunday, informing investors that it had decided to “diversify its asset base” to limit exposure to market volatility. As a result, it would temporarily halt Supercharger simulations buybacks, meaning customers wouldn’t be able to withdraw their funds. Don’t be fooled by Freeway’s damage control—it’s pretty likely the company blew up its accounts and is buying time in the hopes it can fix the situation. If history has any precedent, I wouldn’t bet on Freeway being able to work this one out.
My heart genuinely goes out to anyone affected by this. As a company, Freeway made every effort to appear professional and legitimate. The company’s website lists smiling pictures of its founders and executives while assuring potential customers that they will have “more control” over their assets. In reality, customers giving their money to Freeway is comparable in risk to converting your savings account into the latest crypto meme coin. It might work for a bit and even make you some money, but eventually, it will all come crashing down.
When I started writing this newsletter, I looked back over the last few months to check all the failed yield platforms that have frozen withdrawals or gone bankrupt. Although it’s my job to cover this stuff daily, I was still shocked by the number of defunct companies. In 2022, Celsius, Voyager Digital, Hodlnaut, Zipmex, CoinFLEX, Babel Finance, and several smaller platforms have all blown up, leaving their customers out of millions—if not billions—of dollars.
If the crypto space learns just one lesson from everything that’s happened in 2022, I hope it’s to stop trusting centralized yield platforms. You’re taking a huge gamble when you deposit your money with one of these companies. There’s no regulation, transparency, or on-chain footprint like you get with DeFi protocols, so you usually can’t tell if a platform is insolvent or bankrupt until it’s too late.
There will likely be opportunities to earn juicy, sustainable double-digit crypto yields again in the future, but not while the global economy and crypto market is in such dire straits. Right now, the best thing to do is to keep your assets safe, plan ahead, and wait for the bull to return.
Disclosure: At the time of writing this piece, the author owned ETH, BTC, and several other cryptocurrencies. The information contained in this piece is for educational purposes only and should not be considered investment advice.