With the success and popularity of cryptocurrencies always on the rise, new companies and ideas are forming around the idea of crypto itself. BlockFi is one of those new ideas and concepts.
BlockFi was founded not too long ago in 2017 with the goal of providing credit services to markets with limited access to simple products such as savings accounts.
In short, BlockFi is a non-bank lending company that provides FIAT currency loans that are secured using cryptocurrency as collateral.
BlockFi also offers cryptocurrency interest accounts that pay very competitive rates on deposits of various major coins.
With some of the highest yields in bank savings accounts coming in at about 1%, in contrast, BlockFi offers up to 8.6% return on your cryptocurrencies annually, which is not only higher than the competition but dwarfs what banks can offer you in interest.
The 8.6% APY ( Annual Percentage Yield ) is quite an impressive return for any investment and will definitely keep BlockFi as a top contender for a long time.
BlockFi Features
BlockFi has multiple ways that you can benefit from your cryptocurrency.
Having one of the most impressive savings account yields of 8.6% BlockFI is a great alternative to those only interested in holding on to their currency for a long period of time.
Being a non-bank lending company BlockFi is able to provide loans based on your cryptocurrency as collateral.
If the market was in a downtrend and you find yourself in a need for a quick bit of cash, BlockFi’s lending solution allows you to borrow that money against your crypto and not have to worry about selling that crypto in a down market.
Limited pairs of cryptocurrency can also be traded through BlockFi which offers more competitive trading rates than exchanges.
This is a convenient option for those looking to quickly shift around their portfolio between some of the more major players. Trading is limited to BTC,ETH, LTC, USDC, GUSD for the time being.
BlockFi even offers a Bitcoin rewards Credit Card to help you keep earning crypto even when you are spending money.
1. Funding And Fees
If you don’t own any cryptocurrencies you can simply wire your US dollars into a BlockFi Interest Account.
There are no fees other than an incoming wire transfer fee of $10 which is on the lower end of the spectrum for wire fees.
Your currency will then be converted into a stablecoin such as USDC, GUSD, or PAX.
From here you can trade those stablecoins for other available cryptocurrencies, or keep them as the stablecoins have some of the higher savings interest rates.
There is no need to worry about maintaining a minimum balance as there is no fee for having nothing in the account.
If you find yourself needing to liquidate your account then there are only withdrawal fees to worry about and no maintenance fees once emptied.
The only difficulty may be that the wire withdrawal limit is only at $ 5k USD which is very low for any crypto-related account.
| Coin | Limit |
|---|---|
| BTC | 100 / 7 day period; 0.0025 BTC (30 USD) |
| ETH | 5k / 7 day period; 0.0015 ETH |
| LTC | 10k / 7 day period; 0.0025 LTC |
| Stable Coins | 1M / 7 day period; 0.25USD |
2. Saving Through Interest - BlockFi Savings Account
BlockFi has several features that allow you to fully utilize your cryptocurrencies. One of the biggest selling points of using BlockFi services is to use a BIA or BlockFi Interest Account.
BlockFi interest accounts allow you to earn interest on specific cryptocurrencies as well as allows you to take out loans against the same money.
These are the annual interest rates currently offered for specific cryptocurrencies
| Crypto | Interest Rate % |
|---|---|
| BTC | Varies from 0.5-5% based on value |
| ETH | Varies from 0.5-5% based on value |
| LINK | 4.5 % |
| LTC | 5.5 % |
| Stable Coins | 1M / 7 day period; 0.25USD |
| PAXG | 4 % |
| USDT | 9.3 % |
| USDC | 8.6 % |
| GUSD | 8.6 % |
| BUSD | 8.6 % |
| PAX | 8.6 % |
Paid Interest is deposited into your account on a monthly basis and is in your choice of Bitcoin, Ether, Litecoin, USD Coin, or Gemini Dollar.
The option of being able to choose your interest payout is a nice bonus as you can begin to diversify your portfolio just from earning interest on a different coin.
3. Loans
BlockFi allows borrowing money using your cryptocurrency as collateral.
Coins that can be used for this type of lending feature include Bitcoin, Ethereum, and Litecoin.
The loan period is for 12 months with the interest rate being around 4.5%.
Some conditions apply to taking out a loan such as a minimum amount of $ 5000 withdrawn.
The loan is also based on an LTV (loan-to-value) ratio.
This means that The amount of US Dollars you can borrow depends on the amount of collateral you post against your loan. The LTV ratio was determined by the amount of the loan divided by the value of the collateral for said loan.
| LTV | Interest Rate | Origination Fee |
|---|---|---|
| 50 % | 9.75 % | 2% |
| 35 % | 7.9 % | 2% |
| 20 % | 4.5 % | 2% |
The only real point of issue when it comes to the LTV ratio is due to the volatility of crypto itself. If you posted 50% LTV and suddenly the price of that currency fluctuated severely, you could be liable to have to post more collateral to maintain a minimum of a 50% ratio.
4. Bitcoin Rewards Visa
Launching in Spring of 2021 to US residents in qualified States. BlockFi is offering an unprecedented 1.5% back in Bitcoin on every single purchase. This is the first card that is able to offer such an amazing return on purchases.
The card comes with plenty of sign-up bonuses and is also going to be made of metal as opposed to the standard plastic, which will lead to plenty of compliments and first impressions.
Bonuses include a signup bonus of $250 USD worth of Bitcoin after spending a minimum of $3,000 on the card for the first three months, and increased APY by 2% on your average daily stable coin balance.
The only downside to the card is that there is a $ 200 USD annual fee to use the card.
While this is covered by the signup bonus the first year, it would take $ 15,000 in spending to earn that back in Bitcoin using the 1.5% rewards feature.
5. Security
The money that you deposit on blockFi is not as safe as if it were to be deposited at a bank. BlockFi or rather its custodian Gemini is not insured by the FDIC or the SIPC.
This, however, does not mean that Gemini does not take measures to protect your funds.
The safest ways to store cryptocurrencies to keep them in Cold Storage which is one of the primary ways Gemini stores its cryptocurrencies.
This offline method of storage ensures that they are unable to be stolen or accessed through any online means.
Another layer of security would be that block by claims that the client funds are placed ahead of any Equity or employee funds in the event of any loss.
While this is nice to see on paper it would be interesting to see how this would be handled in practice.
Gemini Is not without its credentials as it is a New York trust company that is regulated by the New York State Department of Financial Services and is a licensed depository Trust.
Gemini is also SOC 2 Type 1 security compliant.
Bottom Line
The biggest question on everyone's mind at the end of the day is “ is it worth putting my money in here?”.
The short and sweet answer to that is absolutely, yes.
It is definitely worth it to put your money into a savings account and earn up to 8 % APY on all your savings.
This is a very high figure and you will not find very many competitors at that rate of return.
That being said, BlockFi is not insured and comes with a higher risk to your money than investing with a bank would bring.
Anybody who already invests in cryptocurrencies probably already has a fairly high tolerance for risk so the point is easily overlooked by most.
For those who already own cryptocurrencies and want less risk than a crypto exchange brings then BlockFi offers a significant rate of return at a significantly reduced risk-reward ratio.
It is safe to say that BlockFi interest savings account is a nice middle ground between the volatility of crypto exchanges and the boring slow movement of banks.
The loans that can be taken out against your cryptocurrencies can be a double-edged sword as the volatility can spike how much collateral needs to be posted.
While I recommend staying away from taking out loans as much as possible, this is a good solution to still keep your cryptocurrency while getting access to a little bit of extra cash.
Overall BlockFi offers some incredible services with their 8.5% APY interest savings account being the gem and main selling feature.
I would highly recommend using BlockFi for anybody who is not too risk-averse and is looking for a good savings solution.
