- BlockFi has started offering interest-bearing crypto accounts
- The accounts have been advertised to offering up to 6.2 percent in annual interest
- Bitcoin and Ether are the only currencies supported as of now
Well, the long list has just gotten even longer with a new offering from BlockFi- interest bearing crypto accounts.
The concept itself is more common with the traditional banking industry but is now being given the crypto treatment with accounts that earn up to 6.2 percent annual interest, as reported on March 20, 2019. The interests will be paid in either bitcoin or Ether and have already attracted over 10,000 customers so far and BlockFi says most of them are retail investors with an average of $40,000 in investments.
While the interest rate each year can go up to 6.2 percent, it is determined on a month to month basis that is based on industry lending rates as well as pre-determined customer acquisition.
“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,” said Zac Prince, chief executive of BlockFi. “We are bullish on the cryptocurrency market and on Bitcoin long term.”
Those who are interested will deposit either bitcoin or Ether and Blocfi then lends them out to investors for arbitrage, short-selling or market-making trades.
Since the announcement of this new service, there has been some pushback. One of the first criticisms is that it simply isn’t a good deal for customers considering that BlockFi is offering 6.2 percent as a maximum interest rate and the bitcoin market has grown over 8 percent since the year began.
David Silver, the founder of the Silver Miller law firm in Coral Springs, Florida, has also criticized them by claiming that a review of their terms and conditions page shows that they do not even guarantee the 6.2 percent rate but merely advertise it.
Another criticism is the fact that this form of account is less protected than traditional ones which have government oversight. BlockFi funds are, instead, insured by Gemini capital.
There is also the fact that market volatility means that the money paid as interest might be worth much less than expected at the end of the day.