I'm thinking of putting short-term cash I hold for quarterly taxes, etc. . . into one of these accounts. Has anybody tried it?

It works like this:

1. Deposit cash in an FDIC-insured account that pays 3.8% interest.

2. The accrued interest is converted to Bitcoin daily and paid out monthly.

The effective interest rate for a deposit of 5 years would have been greater than 10% due to growth in the price of bitcoin.

https://river.com/bitcoin-interest

And BOOM

Directly from River.com

"1River Financial Inc. ("River") is not a bank. USD funds are deposited by Lead Bank, Member FDIC. Your USD is FDIC insured up to $250,000, inclusive of any deposits that you already hold at Lead Bank in the same ownership capacity. FDIC insurance may protect against a failure by Lead Bank, but does not protect against River's failure, nor does it protect against theft or fraud. Bitcoin is not insured by the FDIC, and may lose value."

Bayou City said:

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Check how many fintechs that claimed FDIC coverage are now BK w their customers savings worth nothing. Not worth it.

https://www.cnbc.com/amp/2024/09/17/fdic-banks-fintech-customer-data-synapse.html

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I agree that verifying that the funds are truly FDIC-insured would be prudent. The account is with Lead bank. I'd certainly do my due diligence before I pull the trigger. FWIW, River.com has an excellent reputation.

See above post. I wouldn't touch it.

Bayou City said:

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And BOOM

Directly from River.com

"1River Financial Inc. ("River") is not a bank. USD funds are deposited by Lead Bank, Member FDIC. Your USD is FDIC insured up to $250,000, inclusive of any deposits that you already hold at Lead Bank in the same ownership capacity. FDIC insurance may protect against a failure by Lead Bank, but does not protect against River's failure, nor does it protect against theft or fraud. Bitcoin is not insured by the FDIC, and may lose value."

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If the deposited principal is truly FDIC-insured, the only significant risk is due to the volatility of the earned bitcoin, which is the price you pay for the greater expected returns.

You'd need to know if River pools or not. I'd be shocked if they didn't. Again, wouldn't touch it.

Bayou City said:

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You'd need to know if River pools or not. I'd be shocked if they didn't. Again, wouldn't touch it.

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In other words, does each depositor have his or her own account at Lead bank such that the total amount deposited would not exceed the $250k limit?

ESO. 99.99% of the time they don't.

Bayou City said:

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ESO. 99.99% of the time they don't.

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Thanks for that suggestion. Glad I posted about this.

Follow up question, I have high yield savings in empower personal cash, is this different or similar setup to synapse? I don't consider empower fintech but would be curious to get the boards opinion.

Wouldn't it be easier to simply buy small amounts of bitcoin every month vs tying up cash in a relatively lower yielding savings account?

Ag13 said:

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Wouldn't it be easier to simply buy small amounts of bitcoin every month vs tying up cash in a relatively lower yielding savings account?

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My thought is it's a possible way to earn better yield on money that has to stay liquid without risking the principal.

Ag13 said:

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Wouldn't it be easier to simply buy small amounts of bitcoin every month vs tying up cash in a relatively lower yielding savings account?

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Exactly.

Earn your interest in USD from a "solid" HYSA and go buy your bitcoin elsewhere.

I use SGOV and then reinvest the interst payments in BTC. I pay a .5% spread on BTC purchases. The 30 day y yield for SGOV is 4.89% with a .09% expense ratio. Thus, I have SPIC coverage on the full inventes principal and still manage an after fee take down of 4.3%. Id much rather do that then have principal tied to a FinTech pooled account under the aegis of FDIC protection that pays me 3.8%. That's the same as a 4.3% yield w the buy spread and 4.39% buy spread + expense ratio. so anything that preserves capital and yields more than 4.39% IMO is much safer if it's carries SPIC.

Bayou City said:

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I use SGOV and then reinvest the interst payments in BTC. I pay a .5% spread on BTC purchases. The 30 day y yield for SGOV is 4.89% with a .09% expense ratio. Thus, I have SPIC coverage on the full inventes principal and still manage an after fee take down of 4.3%. Id much rather do that then have principal tied to a FinTech pooled account under the aegis of FDIC protection that pays me 3.8%. That's the same as a 4.3% yield w the buy spread and 4.39% buy spread + expense ratio. so anything that preserves capital and yields more than 4.39% IMO is much safer if it's carries SPIC.

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Similar strategy. I like it. It takes a bit more work but is arguably safer. I suppose you also have to consider the fact that you'll pay capital gains tax on the USD interest you use to buy the bitcoin, but that's not a big deal.

I'm going to ask River if the USD deposits are pooled. They imply they are not.

Correct. I'm a huge crypto advocate but part of that is a natural skepticism around Middle Man FinTech firms that offer a product that you have to peel back several layers of onion to understand the moving parts that can potentially burn you. I'd rather give up convenience for security and I've found the strategy I posted above to make it easier to sleep w both eyes closed.

The other reason I like it is because it allows me to invest in ALT coins or reinvest into MLPs when I feel like there's an opportunity in those spaces.

Again, it's a little more work but for me but IMO it gives a little more mental security and also allows a little more investment diversity since I'm not tied directly into BTC. If I feel like the spread between BTC and ETH is too wide I can trade into ETH or LTC etc and not pay to unwind my BTC position and then reinvest. I can also add to my MLP position and in crease future partnership distribuciones if I feel like BTC is in a fundamental down channel while the MLP space is undervalued.

Its Texas Aggies, dammit said:

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Ag13 said:

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Wouldn't it be easier to simply buy small amounts of bitcoin every month vs tying up cash in a relatively lower yielding savings account?

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My thought is it's a possible way to earn better yield on money that has to stay liquid without risking the principal.

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But they are taking the spread of higher interest rates (probably just by rolling t-bills) and effectively selling you Bitcoin at a premium. What principal is being risked by putting cash in a normal high yield savings account and using the interest to buy bitcoin on your own? This just seems like an unnecessary layer that doesn't provide any actual advantages. Also as interest rates go down, I'd imagine your yield will also go down.

Ag13 said:

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Its Texas Aggies, dammit said:

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Ag13 said:

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Wouldn't it be easier to simply buy small amounts of bitcoin every month vs tying up cash in a relatively lower yielding savings account?

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My thought is it's a possible way to earn better yield on money that has to stay liquid without risking the principal.

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But they are taking the spread of higher interest rates (probably just by rolling t-bills) and effectively selling you Bitcoin at a premium. What principal is being risked by putting cash in a normal high yield savings account and using the interest to buy bitcoin on your own? This just seems like an unnecessary layer that doesn't provide any actual advantages. Also as interest rates go down, I'd imagine your yield will also go down.

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The daily accrual and purchase of bitcoin could be of some value I suppose. How often does a typical HYSA accrue and pay interest that could be used to buy bitcoin?

I do a Coinbase play similarly. Get interest in my usdc sitting in my Coinbase acct and buy btc with the interest each month. I got the idea from this river deal

Couldn't you just put your money in a brokerage account money market earning ~4.2% and then invest the monthly interest into a spot Bitcoin ETF like IBIT?