When BlockFi began offering interest-bearing accounts earlier this month, it seemed to have struck gold. Giving people a place to securely store their bitcoin or ether is paying off for the company and crypto holders. An impressive 10,000 people have signed up for accounts. Almost all of them, roughly 90%, are retail investors.
As the prices for cryptocurrencies have fallen considerably, enthusiasts have pumped more than $35 million in deposits into BlockFi accounts.
From Beta To A Hit
The company announced the private beta launch of the BlockFi Interest Account (BIA) in January. Account holders receive 6 percent annual interest paid monthly in cryptocurrency. Interest earned in BIA compounds monthly, delivering 6.2 percent APY.
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BlockFi claims that since the program rolled out from beta on March 5, it has accrued more than $10 million in assets from retail, corporate and institutional crypto investors. Large accounts are pulling the average balance up to about $40,000.
Worth The Risks?
Even with the outpouring of support, some do not like the risks associated with the product, and safety is a key concern.
Why I'm afraid of BlockFi Bitcoin savings accounts + other daily news via /r/Bitcoin https://t.co/ACOPONZihq
— Blue⚡🔦🕹️ (@CoyotlCompany) March 21, 2019
However, there are factors that allegedly mitigate certain risks. The company explains:
The ability to self-custody large amounts of value with Bitcoin is one of the unique qualities of blockchain technology and something that will always be the preferred method of storage for many in the community.
A concern that has been raised is that users may not understand the terms based on the ads from BlockFi. In response, the company states:
Our new product does carry risk, which we thoroughly disclose and thoughtfully manage. We think it’s important for people to know and understand the realities of rehypothecation and its role as a financial tool to help grow the cryptocurrency industry.
Ebbs and Flows
In a recent interview, BlockFi’s chief executive Zac Prince cautioned about how the interest rate could change, saying:
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 cryptocurrency market and on bitcoin long-term.
This could eventually lead to lower interest rates, but BlockFi can’t guarantee this. Prince has said the launch of the interest-bearing accounts was significant in BlockFi’s goal of becoming the “go-to provider of financial services for crypto investors:”
Lending and borrowing is readily available at the institutional level. The thought is to leverage its relationships and capital markets experience to provide utility and yield on digital assets for crypto investors.
BlockFi offers financial products for cryptocurrency holders worldwide, including those in 47 U.S. states. The company was founded in 2017 by crypto enthusiast Mike Novogratz.