Bitcoin and Ethereum investors are reportedly moving their crypto holdings to interest bearing accounts by the millions. A Bloomberg report shows that in just three weeks, its traders have moved $35 million worth of Bitcoin (BTC), and Ethereum (ETH) to interest bearing crypto accounts at Block-Fi.
Block-Fi is a New York-based company which is a secured non-bank lender that offers crypto asset-backed USD loans to asset owners who collateralize their loans with their crypto. Block-Fi opened their curtains on crypto savings accounts on March 5th, laying on the table a lot of enticing offers which include; an enticing 6% annual interest rate, which is paid out monthly in crypto and compounded to produce a 6.2% annual percentage yield.
It is easy to explain the influx of crypto holdings into these Block-Fi accounts, being that the interest being offered is quite generous; compared to US banks who have steadily offered lower, and lower rates over the years. Block-Fi CEO Zac Prince says the platform’s interest would be subject to fluctuation along with the market prices of Bitcoin and Ether.
This is another stark difference between saving in your traditional bank account, and saving in these crypto accounts; in that your bank offers a fixed rate of return year-in year-out while these account’s rates change from time to time.
Block-Fi CEO Zack prince had this to say about that;
“We expect the interest rate in the account to be higher in times when prices are falling, and lower when prices are rising because demand to borrow Bitcoin is partially driven by market sentiment. We are bullish on the crypto-currency market and on Bitcoin long term.”
According to Block-Fi, its accounts are designed for retail investors and not crypto whales. In a new blog post, the company says it’s introducing a 25 BTC and 500 ETH cap next month.
“…starting April 1st, only Block-Fi Interest Account (BIA) balances of up to and including 25 BTC or 500 ETH (equivalent to roughly $100,000 and $70,000 respectively) will earn the 6.2% APY interest rate.
The statement further said;
“All balances over that limit will earn a tiered rate of 2% interest. To clarify, if you had 25.5 BTC in your BIA account, the first 25 BTC would earn interest at 6.2% and the remaining 0.5 will earn interest at 2%.”
The company is also introducing a flat withdrawal fee of 0.0025 BTC and 0.0015 ETH inorder to “ensure that BIA can support as many clients as possible while maintaining the high quality services we provide to the average crypto consumer.”
Founded in 2017, Block-Fi enjoys the backing of high profile investors who include Coinbase, Morgan Creek Capital, Galaxy investment Partners, Consensys, and Devonshire Investors. This is no surprise at all, seeing as to the potential of these crypto interest earning crypto holding accounts.
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