Crypto Invest, worth investing?







EDIT: ISSUE IS RESOLVED, SEE STATEMENT FROM THE TEAM IN DISCORD, PROPS TO THE TEAM FOR FAST PACED REACTION!:

Crypto Invest Fees - Our intention is (and remains) to “make money only when you make money.” Our fees description in the T&Cs did not convey that and we have adjusted them to reflect the “high-water principle” that is, we will charge success-based fees only when your portfolio is performing better than its peak performance. These changes are live now.





Hi all, let me introduce myself first. I've been a long time follower of MCO, roughly from around ICO time. Although mostly staying in the shadows, I've followed the project and the community with a lot of attention throughout the past year and half.

I don't need to tell all of you it have been some interesting times, with a lot of exciting things, but also with (a lot of) waiting. I won't go into some other issues I sometimes have with the way the team is communicating (usually keep that for myself), but there is a serious issue here that will probably be underrated and addressed as FUD, which is why I make this anonymous blogpost, as nobody would be able to ban this.

Is it really smart?

Of course it is, but not in a good way. See USP number 3 in the picture? "No management, entry or exit fees." Sounds good right? Usually in investment funds like these you get slapped with a lot of fees, expense ratios (between 0,5-1% yearly), investment management fees (around 1-2%), exit fees (depending on when you exit 5%-1%), and so on. So it almost sounds too good to be true from the first sight.

Looking a bit further down, there is a mention that while not charging fees listed above, they do say they take a fee from your profit. Without any further explanation.

Still, if you don't get charged excessive fees otherwise, and they only want part of your profit, that's kinda okay right? Still seems like a good deal to me. Digging further into the app, when you want to launch Invest (after a very sleek explanation of the same things I mentioned above), you need to agree with the T&C's.





Call me crazy, but I'm one of those people who reads T&C's before agreeing to them, I'm a sick human being, I know...

Glad I did though, because this is what I found out (except from the fact that the group who runs Crypto Invest is located in the Cayman Islands): The fees they charge for gains inside the trading engine are 18%, and 9% if you decide to stake MCO inside the app. Seems like a good deal, because it is only deducted from the gains you make, and not from the total investment. They even don't charge any fee if your total amount is smaller than your initial investment. So overall it sounds very positive. Except for the fact that it's a DAILY (!!!!) fee!

It immediately made me think of the mathematical tale where an employee goes to his boss and says, just pay me 1$ a day, and double the amount every day. The boss, thinking it's a good deal agrees, without realizing on the 30th day already he has to pay his employee 1,073,741,823$. Amounts like these might not seem big, but if you charge them every day, it quickly becomes a LOT of fees.

This is where the smart is: it's the perfect way for crypto.com to make a very profitable business on the back of their clientèle.





Examples

Although I had a hunch these fees would really add up over a longer period, I had to see the numbers to back it up. Since I don't have any data from the Crypto Invest app itself, I decided to make some tests with the BTC prices from 1 year back. Since market usually follows the BTC ups and downs, and BTC usually comes out as a sustainable winner (not counting the numerous 500x gains pnd projects). Keep in mind that it kinda looks like an ideal scenario, as we start at 4819$, and ended yesterday at 6563$, so overall we're 36% in the green, which would be a more than royal ROI for any fund.

However, as you all know, between those 4819 and 6563$, there had been a lot of volatility, with prices going up to 19k. And what happens when you get volatility combined with daily fees? That's right: fees!

In the following example I calculated the fees they would take if Crypto Invest would follow BTC price 1:1. I know it would never do that, but it shows you how fast even the tiniest fee on only the part you gained can get out of hand:

https://docs.google.com/spreadsheets/d/1TetMQ6dLbR7eb1IKO9Le-iG-fAT39P23uEnqITZRMoU/edit?usp=sharing

Yep: a WHOPPING 3853$/85% yearly fee/! And that's only the one where you are brave enough to stake MCO for a whole year, double it if you won't have the stomach.

Also you can clearly see your BTC has devaluated from 1BTC to 0.65 BTC.

Those small fees don't look so small now do they? But of course they initially want you to think it's only a small fee, so they can drain you of the profits you make without you even noticing. You won't notice a 20$ deduction on a 10k investment, only if you keep tabs yourself and add it up after a while.



Ok, ok, you will probably argue that such volatility will never occur inside Crypto Invest, as it's designed to go against bear markets, and stabilize its price doing so.

So I made a perfect scenario with the same data, same prices, but ranged from low to high, so you bought at 4.8k, and end at 19k at EOY: https://docs.google.com/spreadsheets/d/1Uj3wCerb_YgM4eC8H9_IYE3_PBuQJVf2DpSS815_88M/edit?usp=sharing

Interestingly, even in the BEST scenario possible, zero volatility, you'd still end up with a total yearly fee of 6.5%, 13% if you don't stake MCO, and you'll have lost 0.1 BTC. As much as the first example would never be deemed possible, this certainly isn't either, so you're effectively paying a minimum of 10% yearly fee + losing BTC value, and that's thinking very optimisticly. Those traditional fund fees don't look so bad right now, do they?





Is there any way around it?

Yes there is, this whole fee thing is based on the fact that you make gains, but you actually don't make any gains until you cash out. Somebody I talked to about this issue made me realise that since there is no exit/entry fee, you could just sell your Crypto Invest stock when you're in the green, then rebuy a bit lower, so you can actually get your gains in your pocket (even though you pay a fee for them).

That would be bad for the company of course, as they would need to pay out the gains instead of just collect the fees for them. Which is why they found a way to discourage said tactics: As I said above if you stake MCO tokens in-app, the fees get reducted from 18 to 9%. Well, they stay 18% but you get 9% of them back in MCO at the end of the month. Yep, those cashbacks are monthly as opposed to the daily fees, and for that exact reason of keeping you from cashing out. If you've read the T&C's, you can see that if you decide to get out before months end, you are not eligible of the cashback that month, so you'll pay the full 18% fee, even though you staked MCO.





This is a serious problem that needs to be looked at and criticized by the community, as they are the cash cows in this scenario.