How to Earn 7.5% Rate on Crypto Deposits, 3% Bitcoin Rewards: BlockFi

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Zac Prince is the CEO of BlockFi, a crypto company that offers high interest rates on crypto deposits. In a recent interview, he explains the market dynamics that allow his company to offer such high rates. It also shares retail product plans after it launched a 1.5% to 3.5% bitcoin rewards credit card. Loading Something is loading.

Call it a short-term bear market or a multi-year crypto winter, the prices of larger cryptocurrencies such as bitcoin and ether have been stuck for weeks of flat trading.

For those who are looking for enough, there is still money to be made.

BlockFi, a crypto-finance company that offers lending, borrowing, trading and other payment services, pays investors up to 7.5% interest rate for depositing their crypto. -currency on its interest accounts. For example, bitcoin and ether depositors can earn an annual percentage return of 4% while those who park their litecoin and chainlink with the company can earn 4.5% and 3% APY, respectively. (Interest for BlcokFi accounts accrues daily and interest payments are made monthly).

However, it is the stable coins that earn the most interest. Depositors in USDC, Gemini dollar, Pax Standard, Tether, Binance USD and Dai can earn between 5% and 8.5% APY on the BlockFi platform.

“We are seeing more and more people using our platform not only to earn interest on cryptocurrencies, but also to earn interest on stablecoins, which I consider to be mere digital dollars. They are interchangeable with dollars from a bank account on our platform, ”said Zac Prince, founder and CEO of BlockFi, in a SALT Talks Tuesday interview with SkyBridge founder Anthony Scaramucci.

What makes high rates possible?

While BlockFi recently cut rates on several crypto asset deposits due to “changing market conditions,” they are still attractive compared to the traditional high-yield savings account, which has seen rates drop to as low as 0.4%.

What has made such high returns possible on BlockFi is that the company is able to charge high rates when it lends the capital that customers hold on its platform, according to Prince.

“The reason we are able to do this is that the cryptocurrency industry is not particularly well connected to the mainstream financial system right now,” he said. “The implication of this is that cryptocurrency companies, cryptocurrency trading companies, do not access the traditional bank debt and credit markets, so they have a higher cost of capital, which they access through companies like BlockFi. “

High rewards usually come with high risk. Prince said the company was reducing potential risk by oversizing the majority of its loans with liquid assets. However, one glaring risk is that deposits are not insured by the Federal Deposit Insurance Corporation. To this, he added that the company, which uses Fidelity Digital Assets, Gemini and BitGo as custodians, has “never lost a dime on any of the loans we make.”

A bitcoin reward credit card that pays 3.5%

Despite recent crazy bitcoin price swings, BlockFi’s business has been doing extremely well.

The company, which has $ 15 billion in total assets and $ 10 billion in outstanding loans, is in talks to raise several hundred million dollars at a valuation of around $ 5 billion. The current round is led by Daniel Loeb’s New York hedge fund Third Point and London-based venture capital firm Hedosophia.

“Despite the daily fluctuations in cryptocurrency prices, this sector is in a long-term secular growth trend,” Prince said. “There are new people coming in all the time, there are new business opportunities all the time.”

He adds that the four-year-old startup still has plenty of room to grow. For example, while Coinbase has 55 million retail accounts, BlockFi has around 450,000 retail accounts.

Just this week, the company launched its highly anticipated Bitcoin Reward Credit Card. With around 400,000 people on the waiting list, the card, which has no annual fee, reimburses 1.5% in bitcoin for every purchase made and 3.5% for the first 90 days. Once redeemed, these rewards are transferred to the cardholder’s interest account where they can continue to earn interest.

And Prince has the ambition to do much more.

In five years, he expects BlockFi to be “very active on the retail side” of its platform. He added that there are plans to launch a debit card, peer-to-peer payment functionality and more on and off ramps that make it easier for customers to transfer funds between their traditional bank accounts and blockchain platforms.

He also predicts that bitcoin will trade between $ 200,000 and $ 300,000 by then.

“Ultimately, the impact I expect will have there and the entire industry will have there, is that financial services will be better, faster, cheaper and more accessible for consumers. global, ”he said.

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