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The decentralized finance (DeFi) explosion in 2020 was driven in a large part by decentralized applications (DApps) with astonishing annual percentage yield (APY) estimates for cryptocurrency staking. Some of the newer platforms advertised 1000%+ yearly interest, but of course, these unreal estimates eventually nosedived towards more reasonable figures.
The insane APYs offered by DApps have mostly collapsed, and many investors are moving to centralized platforms like BlockFi. Interest-bearing accounts are not the only service BlockFi provides. You can also purchase cryptocurrencies on the platform and even get a USD loan backed with your tokens. BlockFi and Binance Exchange’s tweaked copy of Ethereum, Binance Smart Chain (BSC), prove that complete decentralization isn’t always the best solution.
What Is BlockFi?
BlockFi is a cryptocurrency exchange and lending platform available in nearly every U.S. state and most countries worldwide. Few platforms apart from BlockFi have both digital asset trading and lending services. It’s probably the closest thing to a cryptocurrency bank you can find. Unlike regular banks, however, it offers high interest rates on your holdings.
You can fund your BlockFi account with USD via an ACH deposit or wire and purchase supported cryptos. Immediately after your purchase, you start earning passive income, compounded monthly. Compound interest helps grow your wealth, especially when the staked assets are rising in value too.
BlockFi employs immense security measures to keep its users’ cryptos secure. The platform's primary custodian is Gemini, one of the safest cryptocurrency exchanges in the world. Gemini keeps most of the cryptos it custodies in air-gapped (offline) cold storage.
Cold storage is the safest storage solution because it is basically invulnerable to cyberattacks and hardened against physical attacks as well. BlockFi also lets you activate 2-factor authentication on your account to prevent login breaches. Your money is safe and always growing when it's in your BlockFi Interest Accounts.
Services on BlockFi
BlockFi’s flagship service is its BlockFi Interest Accounts. Users can deposit 12 different cryptocurrencies to earn interest. Hundreds of different platforms offer interest for crypto staking, but most lack security and consistency compared to BlockFi. Interest rates vary significantly depending on the asset staked and the amount staked. For example, BlockFi offers 4% APY for Bitcoin deposits less than 0.25 BTC, and between 0.25-5 BTC, it decreases to 1.5%. Take a look at BlockFi’s breakdown on each asset’s rate on its website.
BlockFi has an amazing loan service where users can put up cryptocurrencies as collateral and get a 12-month term loan in USD or stablecoins. This feature can be extremely useful because you can unlock liquidity in USD or stablecoins without having to sell or swap your cryptos, which are both taxable events.
It is a method somewhat similar to how billionaires with their money locked away in stock shares live lavish lifestyles and push back taxes without selling their positions. Banks offer them loans backed with some of their shares, and they only have to sell a few off to pay the interest.
BlockFi’s loans require at least a 50% loan to value (LTV) ratio, which means you need to collateralize twice the amount of the loan or more. Interest on the loan decreases as the LTV decreases, and a 20% LTV loan will currently cost about 4.5% (in the U.S.).
You can also sign up for the waitlist for BlockFi’s Bitcoin credit card. Purchases with the card will earn you 1.5% back in Bitcoin automatically invested into your BlockFi Interest Account.
Using the card incurs no annual or foreign transaction fees. The only possible fees arise from late payments. When you sign up for your card, you get an extra 1.5% on purchases in Bitcoin for the first 3 months. All of BlockFi’s services can be useful to the average crypto investor, and everyone should at least check it out.
Best Interest Rates on BlockFi
The interest rate you earn depends on which cryptocurrency you decide to stake on BlockFi. Let’s take a look at how much annual interest you can earn with different cryptocurrencies through BlockFi’s
USD Coin (USDC) at 7.5% APY (for up to 50,000 USDC): USDC, a stablecoin pegged to the USD, is fully backed 1:1 with USD and issued by regulated financial institutions. It is touted as one of the safest stablecoins to own.
Tether (USDT) at 7.5% APY: USDT is the most popular and very first stablecoin with a massive $61.8 billion market capitalization.
Dai (DAI) at 7.5% APY: DAI is another popular stablecoin minted by the MakerDAO protocol. It’s backed by Ethereum instead of USD.
GUSD, BUSD and PAX at 7.5% APY: All 3 are USD stablecoins backed 100% with USD. GUSD is made by Gemini, and BUSD (on the BSC) and PAX are from Paxos Trust Company LLC.
Litecoin (LTC) at 4.5% APY: The developers of Litecoin said that their intention was for Litecoin to be the silver to Bitcoin’s gold. It uses a different mining algorithm and transactions with it are faster.
Bitcoin (BTC) at 4.5% APY: Bitcoin is the largest crypto by market capitalization and acts as a store of value for millions of people around the world.
Ethereum (ETH) at 4% APY: Ethereum is the second-largest crypto and is the home to decentralized finance platforms using smart contracts.
High volatility may be one of the most well-known aspects of the cryptocurrency market. Generally, cryptocurrencies have lower available liquidity and fewer measures to reduce volatility than traditional markets. Breaking news related to cryptocurrencies that might seem trivial if it were about the stock market can be massively influential.
Celebrities like Elon Musk can crash or pump the entire cryptocurrency market with 1 tweet as he proved in May. Unlike fiat currencies, cryptos can also be banned by entire countries, significantly lowering the possible number of current and future users.
BlockFi pays its users interest on their cryptos by lending them to institutions for higher rates. When volatility is high, institutions may not want to borrow as much due to the increased risk. BlockFi has to adjust interest rates during stretches of high volatility in the markets to respond to decreased demand.
For example, on June 25, 2021, it lowered rates on a few supported cryptos by between 0.5% and 2% after Bitcoin dropped to about $31,000. BlockFi’s interest rates are still some of the highest in the market.
Track Your Cryptocurrency Portfolio
Many cryptocurrency investors like to check their portfolios often, especially when volatility is high. The market is always open and prices can move extremely quickly. In the age of DeFi, crypto portfolios are often decentralized across multiple platforms. It can be frustrating to check all your wallets, exchanges and DApps, just to figure out how much your coins are worth.
CryptoPro Portfolio Tracker has a perfect solution for this problem, and it’s available on iOS and Mac computers. It lets you track your favorite cryptos with the option to import account information from wallets and cryptocurrency exchanges. You can also track your precious metals and fiat currency holdings in the app. You could save a lot of time by concentrating all your portfolios into 1 powerful but simple interface.
Where to Buy Cryptocurrency
Nowadays it seems like there are too many fantastic cryptocurrency exchanges to choose from. Benzinga has great breakdowns of the advantages and disadvantages of each of the top trading platforms. The best exchanges we have found include Coinbase (NASDAQ: COIN), Gemini, eToro, Crypto.com and Voyager. These exchanges offer trading with Bitcoin, Ethereum and most of the other cryptos supported by BlockFi Interest Accounts.
After you set up your exchange account, you need to verify your identity before you can start trading. This process usually entails providing your address, Social Security number and a picture of your driver’s license or other valid ID. Once your identity is verified, you can purchase crypto and send it over to BlockFi to start earning interest.
- securely through Coinbase's websiteBest For:Coinbase Learn
Sum of median estimated savings and rewards earned, per user in 2021 across multiple Coinbase programs (excluding sweepstakes). This amount includes fee waivers from Coinbase One (excluding the subscription cost), rewards from Coinbase Card, and staking rewards. ³Crypto rewards is an optional Coinbase offer. Upon purchase of USDC, you will be automatically opted in to rewards. If you’d like to opt out or learn more about rewards, you can click here. The rewards rate is subject to change and can vary by region. Customers will be able to see the latest applicable rates directly within their accounts.
- securely through eToro's websiteBest For:Demo Accounts
Cryptocurrency is offered by eToro USA LLC (“the MSB”) (NMLS: 1769299) and is not FDIC or SIPC insured. Investing involves risk
Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong. Take 2 mins to learn more
Should you Use BlockFi?
BlockFi is a fantastic platform for investors looking to earn passive income on the side with their cryptocurrencies. Investors who only hold their cryptos without staking or lending them for interest often lose out massively over time. BlockFi provides 1 of the best tools in finance, compound interest. It’s useful because it grows your crypto gains at no cost.
Prospective risk-averse users can also earn up to 7.5% on stablecoins pegged to the USD. You don’t even need to have exposure to volatile cryptos to earn far higher interest than regular bank accounts. Anyone looking for a platform with crypto staking for great rates, crypto collateralized loans and more should absolutely check out BlockFi.
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About Henry Stater
Henry is an expert in all things crypto. He stays up to date with all the latest coins, platforms and technologies in the field. He has particular expertise in the burgeoning decentralized finance ecosystem and loves trying out all the new platforms. He also always follows major events in other financial markets and geopolitics as a whole, especially when an event’s effects ripple through the crypto market.