Crypto Lending Firm BlockFi Raising Interest Rates on BTC and ETH
CEO Zac Prince cites the recent crypto crash as one reason the firm will be changing their interest rates on Bitcoin and Ether.
Clients of one crypto lending company may soon notice some changes in response to the recent drops in the market.
Starting on April 1, BlockFi will be raising the interest account rates on Bitcoin (BTC) and Ether (ETH).
According to CEO Zac Prince, BlockFi users holding between 0-5 BTC now will earn a 6% annual percentage yield (APY), while those with up to 500 ETH will earn a 4.5% APY. Stablecoins like the Gemini Dollar (GUSD) and USD Coin (USDC), will retain their 8.6% APY interest rates.
Why are the interest rates changing now?
With the recent Bitcoin crash caused by the coronavirus restrictions affecting markets, BlockFi has reported “very limited liquidity”. The lending firm said “they did not liquidate USD loan client collateral below a price of ~$4,500, despite the market reaching lows of ~$3,800.”
Therefore the decision to raise interest rates is unexpected when considering how traditional financial institutions are reacting to these changes in the market. Even the U.S. Federal Reserve has cut interest rates to 0%.
Reason for optimism in the current market
Nevertheless, Prince sees hope in the crypto market, citing that BlockFi itself has maintained “perfect performance” with “zero losses” reported.
“Our balance sheet is stronger than ever and shifts in the institutional lending markets have created opportunities that expand our margin.”
The CEO went on to describe how BlockFi has processed the largest number and volume of daily deposits and withdrawals in the platform’s history. Tens of millions in trading volume have continued without interruption as a result of the BlockFi team’s efforts.
“As the global economy weathers a number of headwinds, including the coronavirus pandemic, rest assured that at BlockFi we will remain a stable source of liquidity, while continuing to provide best-in-class wealth management solutions for our clients and the broader cryptocurrency market.”
Notable investors behind the crypto lending firm
BlockFi raised $30 million in a Series B funding round in February. Major investors included Morgan Creek Digital, Winklevoss Capital and Arrington XRP Capital.
This brings BlockFi’s total funds raised to more than $100 million since it was founded in 2018. The platform currently boasts more than $650 million in digital assets.