Crypto lender BlockFi is raising interest rates on bitcoin (BTC) and ether (ETH) holdings, effective April 1.
Users holding up to 5 bitcoins will now earn an annual percentage yield (APY) of 6% as compared to 3.6% APY currently.
Ether holders, on the other hand, will earn 4.5% APY for up to 500 ETH, compared to 2% to 3.6% APY currently. Interest rates on the Gemini dollar (GUSD) and USD Coin (USDC) stablecoins, on the other hand, will remain unchanged at 8.6% APY.
The move seems unusual, given that interest rates are falling in traditional financial markets amid coronavirus risks.
Zac Prince, founder and CEO of BlockFi, told The Block that there are two key factors enabling the company to raise interest rates: “The supply constraint, as other market players have removed their lending business, and many market making and arbitrage opportunities coming out of the extreme volatility we experienced last week.”
“The next few weeks will be interesting as we see if assets like gold and bitcoin decouple from the public equity market. In times of extreme panic, every asset is typically sold off. After the dust settled in 2008, gold is doing very well and we will see if bitcoin has a similar cycle,” added Prince.
He went on to say that BlockFi’s balance sheet is “stronger than ever and changes in institutional lending markets have created opportunities that expand our margin.”
BlockFi also reported fewer loan liquidations during last week’s bitcoin crash, “with zero losses in the loan portfolio.” The company said it did not liquidate collateral for USD loan customers below a price of around $4,500, despite the market hitting lows around $3,800.
Founded in 2018, BlockFi has seen significant growth in two years. The company’s revenue grew 20x in 2019, and it currently has over $650 million in assets on the platform.
Last week, BlockFi added money transfer support to allow non-crypto users to buy their first $10 worth of crypto and earn interest on it.
The company is backed by notable investors including Valar Ventures and Morgan Creek Digital. It has raised over $100 million in funding to date, according to Crunchbase. Most recently, it raised $30 million in a Series B round.
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