As blockchain technology and its associated economy continue to mature, a growing number of projects are aiming to provide services that have been the mainstay of more established, and traditional entities. Nowhere is this more evident than in the decentralized finance (DeFi) sector, and BlockFi is a wealth management platform that enables users to earn […]
As blockchain technology and its associated economy continue to mature, a growing number of projects are aiming to provide services that have been the mainstay of more established, and traditional entities.
Nowhere is this more evident than in the decentralized finance (DeFi) sector, and BlockFi is a wealth management platform that enables users to earn interest on their digital assets as well as borrow funds by using their cryptocurrency holdings as collateral.
The project aims to disrupt the financial industry by allowing people to put their digital assets to use, and by offering attractive terms for anyone intending to make use of their platform.
BlockFi is based in New York, USA and retains a business address at 201 Montgomery Street, Second Floor, Suite 263, Jersey City, New Jersey 07302.
The company was launched in August 2017 by Zac Prince and Flori Marquez, and the pair have successfully raised over $60m in funding over four investment rounds, with the last round taking place in December 2018.
BlockFi has secured investment from well regarded entities including ConsenSys Ventures, Kenetic Capital, SoFi, Mike Novogratz’s Galaxy Digital, and Anthony Pompliano’s Morgan Creek Capital.
BlockFi is classified as a secured non-bank lender and offers US Dollar loans that are backed by crypto assets and operates under Article 9 of the Uniform Commercial Code which governs secured lending.
The company also files UCC-1 financing statements with each of its borrowers’ states. BlockFi holds its clients’ crypto assets with Gemini which is a licensed cryptocurrency exchange and registered custodian, and issues loans into their bank accounts in the form of USD payments. The team have also connected with third party loan servicer Scratch which manages all loan contracts and repayments.
The platform is currently operating in around 35 US states, and collateral options include Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC) and Gemini’s GUSD, with plans to integrate additional crypto assets in the near future.
Why Use BlockFi?
The company runs in compliance with the USA’s federal laws, and the core team are experienced professionals with significant experience in digital finance and lending. The company’s main selling point is that it allows individuals to put their crypto holdings to use and deposit them into interest accounts or use them as collateral for loans.
The team also offer flexible repayment plans with quite reasonable interest rates, and aim to come to the rescue of individuals who need cash in the short to medium term, and prefer to keep a hold of their digital assets in order to benefit from any future high prices.
At the same time, anyone who purchased cryptocurrencies such as Bitcoin and Ethereum at rates much lower than today’s current prices, would be subject to significant capital gains taxes if they were to sell their holdings.
BlockFi alleviates these issues by offering crypto backed US Dollar loans that provide crypto holders with immediate access to fiat without forsaking the benefits of owning cryptocurrencies during a potential price surge. At the same time, anyone depositing crypto assets with BlockFi can also benefit from compound interest being applied to their holdings which provides them with a new way to passively increase their portfolio value.
Which Services Does BlockFi Provide?
BlockFi essentially offers two main products namely their Interest and Loan Accounts.
The BlockFi Interest Account
The BlockFi Interest Account (BIA) allows you earn compound interest on your Bitcoin (BTC) and Ethereum (ETH) deposits. In order to receive interest payments paid out every month in either Bitcoin or Ethereum, it’s just necessary to store the cryptocurrencies with BlockFi. Currently, anyone using the platform can expect an annual yield of approximately 6%.
The BlockFi Crypto Backed Loan Account
Users of the platform are able to deposit their Bitcoin (BTC), Ethereum (ETH), or Litecoin (LTC) in order to receive a loan in US Dollars. It’s possible to loan an amount worth up to 50% of the assets deposited and the rate of interest starts at around 4.5% with a 12 month standard loan duration, although BlockFi also includes options to prepay or refinance at the end of the loan term.
How Does BlockFi Work?
Users can either deposit cryptocurrencies into an interest account, or use them as collateral for a USD loan. The interest account pays a variable interest rate of around 6% annually, (which compounds monthly) with returns paid out in Bitcoin or Ethereum. With regards to the loan account, it’s important to note that as BlockFi provides secured loans backed by users’ cryptocurrency holdings; they can legally keep the funds held as collateral if an individual defaults, or stops paying back the loan.
This works in a similar way to a bank giving a client a mortgage and using the property as collateral, in the event that the borrower stops paying off the loan, the bank can repossess the property. With BlockFi, once an individual has been approved for a loan, their assets are transferred to a wallet controlled by Gemini, and remain there until the loan is paid off.
After BlockFi receives the collateral, the client’s account is credited with US Dollars, and they are required to pay interest on the loan on a monthly basis before using their final repayment to pay back the loan amount in full using either fiat or Bitcoin and Ethereum.
In the event of any issues, BlockFi can take possession of the equivalent amount of cryptocurrency needed to pay off the rest of the loan, and borrowers are expected to make a crypto deposit worth a minimum of twice the value of the loan as collateral.
The application process can be completed in a few minutes, and users can specify their desired loan terms and submit their application with a response generally being given a few hours after it is received. BlockFi have certain requirements regarding who is eligible for a loan, and to get approved, it’s necessary to pass their loan qualification criteria.
Who Can Take Out a Loan on BlockFi?
When applying for a loan, you just need to sign up on the website, input your requested loan amount, select the crypto you want to deposit, and enter your KYC/AML information for identity verification purposes. However, BlockFi does not perform any hard or soft credit checks, meaning that using the platform does not affect your credit score. BlockFi is able to operate without having to credit check its clients as crypto assets are sent over to Gemini and held as collateral before loan proceeds are issued therefore mitigating any risk.
The Loan Eligibility Criteria
Before taking out a loan, you will still need to provide your personal details, social security information, and financial history. In order to be approved you’ll have to meet certain requirements and these include:
A minimum of $15,000 in crypto assets
No liens on assets (including tax liens)
In addition, the BlockFi Interest Account is generally available to anyone over the age of eighteen. However, the BIA is not available to the inhabitants of nations sanctioned by the US or on any watch lists. Furthermore, the Interest Account is not available to anyone in the European Union or the states of New York, Connecticut, and Washington.
How the Loan Process Works
The BlockFi team have outlined the following 9 step process:
Create an account at https://app.blockfi.com/signup
Click on the Loan tab
Click Apply and fill out the application.
You will receive a decision less than 24 hours
Review your loan offer and sign the loan agreement
Transfer collateral to BlockFi’s secure storage wallet
You then receive your loan the same day in USD via a wire to your bank account or stablecoin to your wallet address of choice.
Make interest only payments monthly using USD, BTC, ETH or LTC
Pay off the principal in one payment at the end of the term or refinance at current rates
BlockFi’s Terms and Conditions
BlockFi provides an Individual Account, which is owned by one person or entity who can deposit, transfer or withdraw the cryptocurrency held in the account. They also offer a Business Account which is owned by a corporation, or other commercial entity holding an account in any capacity other than an individual capacity.
BIA compound interest
BlockFi Interest Account clients can deposit their Bitcoin or Ethereum and earn up to 6% interest annually. This is paid out on at the beginning of every month, and the interest earned by account holders compounds, increasing the annual yield to 6.2%. Here, with a 6% compound interest rate, a client who deposits 1 Bitcoin, on February 28 will have a balance of 1.005 BTC at the end of March. This process repeats month over month and leaves the client with 1.062 BTC 2 months later and continues until the client decides to withdraw their funds.
BlockFi revealed in a recent news release that they will be making the following rate adjustments to BIA accounts as of June 1, 2019:
BTC balances above 25 BTC will earn 2.15% interest (previously 2% interest rate). All balances between 0.5 BTC and 25 BTC will continue to earn 6.2% APY
The rate for deposits of between 25 ETH and 100 ETH will decrease from 6.2% to 3.25% APY
Balances above 100 ETH will earn 0.2% APY
The minimums and maximums for the BIA
There are no minimum or maximum deposits for the BlockFi Interest Account. Despite this, only deposits over 0.5 BTC or 25 ETH actually accrue interest. Balances of up to and including 25 BTC or 250 ETH (equivalent to around $130,000 and $40,000 respectively) will earn the 6.2% APY interest rate. Any balances over this limit earn a tiered rate of 2% interest. This means that having 25.5 BTC in a BIA account, sees the first 25 BTC earning interest at 6.2%, while the remaining 0.5 BTC earns interest at 2%.
Crypto loan stipulations
BlockFi loans start at a 4.5% interest rate with an additional origination fee of around 1% to 2% and generally have a duration of 12 months. In addition, the loan-to-value (LTV) ratio determines the amount of crypto collateral needed to be deposited before taking out a loan, and BlockFi offers LTVs up to 50% with BTC, ETH, or LTC accepted as collateral.
BlockFi loans are interest-only and clients are expected to only pay interest during their monthly payments, with a lump sum payment for the remaining amount being required at the end.
Is BlockFi Safe?
Assets deposited with BlockFi are securely stored at unique wallet address generated by Gemini. The exchange is licensed by the New York State Department of Financial Services, and is a fiduciary under New York Banking Law and adheres to strict capital reserve requirements and banking compliance standards. Gemini also has digital asset insurance coverage and is SOC 2 Type 1 security compliant across both its exchange and custodian platform.
Gemini is also known as being one of the most secure exchanges in the sector and employs security protocols that include cold storage, two-factor authentication (2FA), and Amazon Web Services hosting. Any assets sent over as collateral for a loan, are transferred into Gemini’s cold storage system, and this offline storage helps to protect users’ funds from cyber attacks. BlockFi also makes use of 2FA and users are prompted to input a password and verification code generated by an authenticator app, upon logging in.
BlockFi also reserves the right to generate interest on assets held in Interest Accounts by lending them to institutional and corporate borrowers. However, in order to ensure loan performance, BlockFi lends crypto on over-collateralized terms (similar to the structure of our crypto-backed loans), and employs an automated risk management system which monitors positions 24/7, and provides the same risk management system used with BlockFi’s crypto-backed loans.
Is BlockFi Suitable for Beginners?
Due to the eligibility requirements attached to taking out a crypto backed loan, the platform appears to be suited to more savvy individuals with some experience of business and investing. However, there are no minimum deposits for the BlockFi Interest Account which may be attractive to beginners, although only deposits over 0.5 BTC or 25 ETH actually accrue interest. Again this may prove to be too steep a minimum for a beginner, unless they have recently purchased cryptocurrencies specifically for this purpose.
Despite this, BlockFi attempts to cater to newer entrants to the market by providing a host of resources on their website and these include a Resource Center, Blog, FAQ page, and Loan Calculator. BlockFi’s signup process is pretty straightforward, and anyone opening an interest account can soon earn compound interest passively, however, the loan accounts are more complicated to understand with regards to mitigating risks.
In the event that your crypto portfolio drops in value, you may be required to deposit additional funds and post more collateral. For example, anyone taking out a loan against $100,000 worth of Bitcoin is eligible for a loan amount of $50,000 due to BlockFi’s loan-to-value ratio of 50%.
If the price of Bitcoin falls by 30% and the collateral drops to $70,000 in value, the loan proceeds of $50,000 are equal to 70% of the value of the collateral as 50,000 divided by $70,000 comes close to 70%. This threshold causes a trigger event to take place, and upon notification by BlockFi, you have 72 hours to contribute more collateral in order to further support your loan.
However, the team prefer to provide a cushion of a 50% drop in value before a trigger event is issued meaning that the LTV rate may be adjusted in order to facilitate this.
All in all, BlockFi is more suited to individuals with some experience of business or investing, or institutions aiming to earn compound interest on their crypto holdings. However, the volatile nature of the cryptocurrency market means that anyone who has been involved in the space for close to a year should have a good understanding of the potential for significant price movements.
Some Points to Consider
Despite handling cryptocurrencies, BlockFi operates a quite centralized service, and states in its terms of service that the interest rate on BIAs isn’t fixed, and can be changed every month.
They also state that will effectively take ownership of your funds and will “pledge, repledge, hypothecate, rehypothecate, sell, lend, or otherwise transfer or use any amount of such cryptocurrency separately or together with other property, with all attendant rights of ownership”.
This essentially gives BlockFi the right to handle your funds in any way they deem appropriate and on top of this, there’s no guarantee you will receive any new assets generated from a hard fork, and interest accounts are also not covered by insurance against losses.
Furthermore, the company’s business model requires BlockFi to operate on fractional reserves for their cryptocurrency holdings much like a traditional bank. As they choose to sometimes sell and lend cryptos in order to generate additional fiat, the volatility of cryptocurrency prices can lead to adverse results as borrowers on their platform only repay the USD value of their loan.
However, the company may have more leeway to operate given that most loans last for 12 month periods, and they can expect the minority of their users to demand sudden access to their crypto deposits.
Earn interest on Bitcoin and Ether deposits
Fast liquidity without cashing out of cryptos
Loan approval without traditional credit checks
Loan eligible for US tax benefits
Large loans available
Interest rate not fixed
Fractional reserve business model
BlockFi provides a useful service for anyone sitting on considerable stacks of cryptocurrencies and institutions or early adopters who have been able to amass significant crypto holdings are well positioned to benefit from the service.
Anyone interested in taking out a crypto backed loan is required to have at least $15,000 in Bitcoin or Ethereum which is out of the reach of most crypto investors. In addition, you must deposit at least 0.5 BTC or 25 ETH to accrue interest in a BlockFi Interest Account.
Despite this, BlockFi provides eligible individuals and corporations with an alternative way to raise capital and allows them to generate funds without having to liquidate their crypto holdings. The company is transparent, and regulatory compliant, and also provides financial products will reasonable fees and interest rates.
However, the amount of control they hold over their clients’ assets, and their preference for selling and/or trading assets for profit make this a service best suited to individuals with a high aptitude for calculating risk.
It’s also a good option for crypto holders in the US that live in states that charge capital gains tax as BlockFi allows people to generate funds without cashing out their holdings and becoming liable for capital gains taxes.
The recent market fall has led to traders rushing toward sell-offs, even as Bitcoin’s price started to consolidate. The king coin’s downtrend on June 12, which led to an over 6% fall in valuation, was followed by several alts such as Binance Coin, Filecoin, and Tron’s TRX. Breaking through important support levels, these coins also faced rising selling pressure and depleting capital inflows. Their south-bound movement kept them vulnerable to additional losses going forward.
Binance Coin continued on its downtrend. After gaining over 33% just between May 31 and June 2, its valuation fell by 20% during June 7-9. Still trading in the red, the coin was priced at $337.8 at press time. After testing resistance at $365, it had fallen a further 13.2% over the past week.
Relative Strength Index or RSI dipped below the median line on June 10 to 39.8 at press time. If selling pressure continues to mount, the coin could be headed for the oversold zone. As Parabolic SAR’s dotted line hovered above the candlesticks, a downtrend for the price action could be noted.
However, according to Awesome Oscillator’s histogram, bullish momentum could be seen creeping in although it was too early to declare a positive price movement based on the indicator alone.
The support at $304 remained strong and could act as a savior if BNB continues its downward movement.
Filecoin lost 26% of its valuation during the market reduction on June 7. The coin fell through support lines at $84.5 and $75.5 and had since lost further valuation during the price fall on June 11. It was trading at $69 and saw slight gains on the four-hour chart with the emergence of a green candlestick at press time.
Chaikin Money Flow indicated that traders rushed to sell their holdings on June 12, as the capital outflows mounted way over the inflows. Selling pressure also continued to be overpowering, as Relative Strength Index continued to hover over the oversold region since June 8. The convergence of the Bollinger Bands did highlight the reduced volatility of the market and price action could be constricted going forward.
The blockchain network recently hit several milestones. Tron’s daily active users hit an all-time high of 5.26 million, while the total daily transaction count has also hit an all-time high of 6.22 million on Tuesday.
Nevertheless, Bitcoin’s retracement on June 10-11 proved to be detrimental to Tron, which fell by over 12% during this time. The coin broke through its support at $0.069 but found new support at the $0.065 mark, with the former acting as a strong resistance. The 24-hour trading volume for the coin also fell by 31% over the past day.
Bollinger Bands remained diverged during this time, indicating that market volatility was picking up. The appearance of a red line below Awesome Oscillator’s histogram suggested that bullish momentum was starting to surface on the coin’s price action. Moreover, MACD’s histogram closed in one a bullish crossover, even as the lines remained below the equilibrium and moved in alignment with one another.
Since the indicators suggest that bearish momentum is declining, TRX could defend $0.065 support from a breakdown. In case the support is broken, the coin could face a plunge of over 20% towards the next support at $0.055.
Why NFL’s Russell Okung Asked Nigeria To Adopt The Bitcoin Standard
Following El Salvador’s decision to grant Bitcoin the status of legal tender, other government officials in the region have hinted at adopting similar measures. Most of the interest seems to have a source in developing countries. Their populations have been the most benefit from Bitcoin’s open and censorship resistance network. NFL’s professional player Russell Okung […]
Following El Salvador’s decision to grant Bitcoin the status of legal tender, other government officials in the region have hinted at adopting similar measures. Most of the interest seems to have a source in developing countries. Their populations have been the most benefit from Bitcoin’s open and censorship resistance network.
Okung is of Nigerian descendant and is well-known for his pro-BTC stance. He famously used the phrase: “Paid me in Bitcoin”, as a demand to his team’s management. The professional football player has kept an eye on the situation in El Salvador and believes that “soon every nation will be faced with this decision”.
Therefore, Okung argues that it will be more beneficial for the country to be first in Africa to make BTC legal tender. In that way, Nigeria will “will enjoy significant advantages globally for generations to come”.
Similar to El Salvador, Nigeria and other countries in Africa have placed their fate in “the hands of global central bankers”. Okung believes these entities have acted for their own benefit and not those of the Nigerian people.
The NFL’s player emphasizes that the current global economic outlook calls for fast and extreme measures. Other countries, Okung claims, such as Russia, China, Kenya, and Iran use Bitcoin in some form to “circumvent U.S. sanctions” and retake more participation in the global financial system. He adds:
I’m proposing an equally aggressive approach to national Bitcoin adoption which would significantly bolster every sector of the Nigerian economy and revitalize the spirit of every Nigerian domestically and abroad.
What Countries Risk By Not Adopting Bitcoin
Nigeria has a troublesome history with the cryptocurrency. A national ban was imposed in the country, only to be removed after a couple of days when BTC’s price rose 46%. The measure caused people to panic buy BTC to protect their savings, businesses, and hedge against the situation described by Okung.
Data from Statista indicates that around $400 million are traded in cryptocurrencies in this country for 2021 alone. This suggests that the Nigerians have a lot of interest in this asset class.
The African country has seen a wave of massive protest, as a report from The Guardian claims. Nigerians have been celebrating Democracy Day and have mobilized to manifest rejection for their government’s bad governance.
The report claims that Nigeria is one of the most corrupt countries around the globe. Thus, seems logical that their citizen has high Bitcoin adoption levels. At the same time, it seems improbable that government officials will give BTC legal tender status. Still, Okung presented his arguments, he seems to understand the benefits for Nigerians and what truly it’s at stake.
(…) a delay in pursuing a national plan for bitcoin adoption will risk a scenario where Nigeria is left behind and its citizens excluded from the possibility of significant wealth creation and preservation.
At the time of writing, BTC trades at $37,464 with moderate gains in the daily chart. BTC experienced high volatility during the weekend. In order for the bulls to take control, the $40,000 resistance must be flipped into support in the short term.
Bitcoin maximalists are currently gaining from the dropping altcoin market capitalization. Another group in on that is DeFi project traders and HODLers. This weekend, the altcoin market capitalization dropped further. In the past 7 days, the altcoin market capitalization has dropped along with a drop in altcoin prices. BNB, ADA, DOGE, XRP, DOT and CRV have dropped and this has increased the accumulation, investment inflow.
Low marketcap projects have offered high returns over the past 7 days. There are several factors supporting this narrative. Increasing trade volume of DeFi projects has increased in proportion to altcoin market cap. The demand across exchanges has increased and there is an increase in the number of unique wallet addresses and TVL. This may change the narrative of DeFi to bullish.
High market cap projects may lead to the increase in demand and investment inflow proportionate to the interest of their users. The low market cap projects continue to face a correction when traders exit. The drop in altcoin market capitalization has a direct impact on DeFi users.
The diminishing altcoin market capitalization has had a direct impact on the investment inflow, the number of traders and the demand across exchanges. This is bullish for DeFi projects as the rising number of users and the metrics related to number of trades, wallets and users indicate a growing interest, investment, institutional investment inflow and growth in DeFi market capitalization.
With the rise in the number of DeFi projects, there is a surge interest from institutions. With the upcoming biggest smart contract event of the year, it is likely that DeFi projects like UNI, CAKE, SUSHI, AAVE that haven’t rallied in the past 2 weeks would rally following increasing demand and popularity, social media mentions.
When the average price chart of these projects is observed, and they are ranked in accordance to their ranking of growth in Active users, there is a strong correlation between users and market capitalization. AAVE, UNI, SUSHI have ranked the highest. Though ranking does not have a direct correlation with social volume and price, it has increased following drop in altcoin market capitalization. This builds a bullish case for DeFi in the following two weeks.
The Purpose Bitcoin ETF holdings have reached an all-time high of 19,692.149 BTCdespite the current bitcoin market decline.
The dip in the bitcoin market has not scared off Canadian investors. By considering the Purpose Bitcoin ETF re-accumulation, there is an indication that investors are buying the dip. Over the last month, Purpose’s holdings have increased by 963 BTC.
BTC is currently sitting at $36,028, a steep drop from its all-time high of $63,000. However, despite the flash crash, which brought the price down to around $30,000, the ETF has been steadily gaining over time.
Its holdings at the current price amount to around $709 million.
Purpose Bitcoin ETF success
The Purpose Bitcoin ETF launched in February 2021. It is hosted by the Canadian investment company Purpose Investments.
The company won approval for the ETF from Canada’s regulators and continues to be successful. Two days after its launch, the ETF grew its assets under management (AUM) to over $400 million.
This ETF offer investors the chance to invest directly into physically settled ether.
No signs of ETF approval from U.S.
Not only was the bitcoin ETF a first for Canada, but it was also a first for North America. It was hoped that this bold move would encourage its southern neighbor, the United States. However, this was not the case.
The U.S. is still to approve an ETF, despite the multiple applications from various parties. In addition, it appears even the success of the Canadian ETF hasn’t been able to sway regulators.
Most recently, the SEC delayed its decision on VanEck’s latest filing just hours before the deadline. This keeps it in the pile of over a dozen applications that are still in limbo.
All the information contained on our website is published in good faith and for general information purposes only. Any action the reader takes upon the information found on our website is strictly at their own risk.
After working in news and lifestyle journalism, Leila decided to bring her interest in cryptocurrencies and blockchain to her day job. She now runs the Features and Opinions desk at BeinCrypto which fits perfectly with her enthusiasm for crypto’s social and political impact.