How Ethereum (ETH) rise affects Kuailian yields

By August 1, 2020Ethereum
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Balance

As I have already explained in other articles on the web, Kuailian uses Ethereum (ETH) as a payment method. However, since it doesn’t work with PoS technology yet (that will come with ETH 2.0), ETH is not one of the tokens that Kuailian works with on its Staking products.

In other words, Kuailan operates with Master Nodes from other cryptocurrencies and receives returns for it. Kuailian receives those returns in different cryptocurrencies, which transforms into ETH to liquidate the daily returns to clients.

The effect of the ETH rise

Since July 22, ETH has started an upward trend that has led to annual highs in a very abrupt way.

It has been a meteoric rise. In just over a week, ETH has increased its price by more than 40%.

The rest of the cryptocurrencies, although most of them are also trending upwards, are not growing as fast as ETH.

This means that, with respect to ETH, they are depreciating.

That is, with the same rate of generation of returns, Kuailian can buy less ETH, and therefore, although the efficiency of the pool remains the same, the final return that reaches the customer is lower.

Comparison with Dash

Dash is the predominant cryptocurrency in the Kuailian pool.

On July 20, Dash was trading at $ 69.02 and on July 29, it was trading at $ 81.74, representing an appreciation of 18%.

On its side, on July 20, ETH was trading at $ 236.15 and on July 29, it was trading at $ 318.19, representing a 35% appreciation.

In other words, DASH has grown 17% less than ETH in this period. It has depreciated against ETH, like the vast majority of cryptocurrencies.

Does that mean Kuailian’s final returns are going down? Let’s see it with an easy example.

Numerical example

Let’s assume a person has 10 kuais of low risk (LR) and 10 kuais of medium risk (MR).

July 20th

On July 20th, Kuailian’s daily returns were:

LR: 0.12%

MR: 0,31%

Therefore, that person received 0.043 ETH (0.012 + 0.031).

Looking at the ETH quote that day ($ 236.15), he received $ 10.15.

July 29th

On July 29th, Kuailian’s daily returns were:

LR: 0.11%

MR: 0,26%

Therefore, that person received 0.037 ETH (0.011 + 0.026).

That means 14% less return on ETH value (remember that Dash depreciated 17% compared to ETH in that period).

But looking at the ETH price that day ($ 318.19), he received $ 11.77, that is, 16% more than on July 20.

Conclusion

When a very rapid growth in ETH happens, if the rest of the cryptocurrencies that make up the pool are not able to follow the rise,, Kuailian’s returns on ETH are reduced as the Crypto / ETH pair is negative.

However, measured in FIAT value, Kuailian’s yields compensate and exceed that effect, obtaining superior yields.

Furthermore, if the ETH generated by previous returns have been preserved, these will also be affected by the increase in the value of ETH.

Therefore, although at the ETH performance level, it may seem like bad news, in my view, the ETH rise is very positive news.

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