Times are tough in the risky world of crypto lending.

Before the market began to freeze over, Craig Bowman estimates he was making the equivalent of 25,000% annually by lending out his crypto holdings. Now, he says, his returns have collapsed – yet he’s pressing on anyway.

While most investors who bet on crypto own Bitcoin, Ether or ETFs, Bowman is part of a vast network around the world that have used their crypto assets to earn outsized interest. It’s difficult to determine exactly how much money is involved, but as recently as this year - before the market's steep decline -- it ran into the hundreds of billions.

There are various ways to do it, including yield farming and staking, which involves using coins to help process orders on a blockchain.

These practices were wildly popular until the recent selloff. Of particular concern now is whether people will get their crypto back — and at what price — from experimental crypto banks and apps that have been left reeling.

But Bowman, a 55-year-old who works in law enforcement, is unbowed. He’s lending a so-called stablecoin called USDC.

USDC is considered much safer than TerraUSD, the algorithmic stablecoin that plunged in value recently, even though it was supposed to be pegged to the dollar. Bowman says he’s confident USDC, which is audited and backed by collateral, will hold up and that he can reap generous returns by lending it.

“If I can make 9%, it’s better than making nothing,” Bowman said. “There’s always a risk, but if your bank is paying 0.5% and crypto is paying you 9%, that means something.”
He’s Out

Not all crypto lenders are as optimistic.

Lukas Levert says he’s pulled back, at least for now. Levert, 25, invested as much as $25,000 in recent years to earn interest from lending a variety of coins. He says he did pretty well. But this selloff has given him serious pause. For now, he’s out.

“It’s all very nascent technology,” Levert said, adding that he’ll be back when the market stabilizes.

Trouble for crypto lenders is one more illustration of how the entire ecosystem that’s sprung up around cryptocurrencies is being put to the test. Yields have dwindled in every corner of the market, from well-known coins to obscure ones. The value of crypto assets tied up in various decentralized platforms has dropped 60% since January, to about $39 billion, according to DeFiPulse, a crypto analytics site.

Yield farming, and crypto lending in general, has been been criticized by some big names in the field. In an interview with Bloomberg News in April, crypto billionaire Sam Bankman-Fried described the complicated mechanism of yield farming and likened it to a Ponzi scheme. The recent troubles at crypto lenders including Celsius and Babel Ltd., as well as news of job cuts at exchange Coinbase Global Inc., have only added to the anxiety.

Amid the storm, many have lost money.

Nhat Nguyen, who lives in New York, started lending a coin called Avalanche about eight months ago, just before crypto plummeted, and has now lost about $2,000. The 33-year-old, who has masters degrees from the Massachusetts Institute of Technology and Harvard’s Kennedy School, recently left the traditional finance world — past jobs include roles at JPMorgan and Goldman Sachs — to work for a crypto company.

Despite the losses and the ongoing risks, she's still trying to earn interest from some stablecoins.

"Lots of projects are probably going to go out of business, but others will keep building and providing," Nguyen said. "I have faith in it, I don't think this is the end of crypto."

This article was provided by Bloomberg News.