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Crypto Firm BlockFi Trims Interest Rates of Bitcoin Savings Accounts

Last Updated March 4, 2021 3:51 PM
Chris Chiddle
Last Updated March 4, 2021 3:51 PM

BlockFi trims payouts for hedge funds and VCs provides a boost for “average crypto investors”.

The BlockFi Interest Account (BIA), which launched as a private beta in January, before rolling out to the public at the start of March, has so far been dubbed a “huge success” by the firm.

The BIA gives investors a return whether the crypto market is up or down, and is proving hugely popular with investors.

It has drawn in around $35 million in investments so far, and shows no sign of stopping, in a blog post  BlockFi said:

Since our public launch on March 5, BIA has grown by over 400% and counting.

Now, BlockFi is adjusting its interest rates to favour retail investors – its core market – making sure they can still benefit from the firm’s 6.2% APY, while making payouts on larger deposits smaller.

Staying true

BlockFi says despite an “unanticipated demand” from crypto hedge funds and venture capitalist firms, 75% of BIA customers have a balance of less than 5 BTC or 150 ETH, and that the median account balance is around $7,000.

BlockFi said it wants to stay true to its “consumer-focused” market:

This is a testament to the market demand for simple and easy to use consumer-focused products in the crypto ecosystem. We are so grateful for our early adopters’ support and look forward to giving even more investors a chance to earn a yield on their crypto.

Starting April 1, only 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 rate.

Balances above that limit will earn a tiered rate of 2% interest.

Still profitable

So, for example, if you have 25.5 BTC in your BIA account you will receive a rate of 6.2% on the first 25 BTC, and a rate of 2% on the remaining 0.5 BTC.

In addition, withdrawal fees will be introduced on April 5. BlockFi says the fees will be a flat rate of 0.0025 BTC and 0.0015 ETH, with withdrawals submitted before that date being free.

BlockFi says it was developed as a product for “average investors”, and it wants to support this core market:

From the start, BIA was meant to be a consumer-focused product. While we greatly appreciate the widespread adoption of BlockFi’s products, our mission is to provide the average crypto investor with the tools to build their wealth and invite new participants into the ecosystem.

It added:

These small adjustments are necessary to ensure that BIA can support as many clients as possible while maintaining the high quality services we provide to the average crypto consumer. We anticipate that our minimum interest-earning deposit amount will drop in the coming months.

BlockFi was setup in 2017, following an investment from crypto bull Mike Novogratz’s Galaxy Digital firm.

BlockFi started by developing a dollar-based cryptocurrency lending fund that allowed holders of ethereum and bitcoin to borrow money, while using these assets as collateral.

Seeing the potential of the crypto industry to grow, the developers saw an avenue to make money by providing affordable interest rates and high levels of fund security to crypto enthusiasts and retail investors.