Bitcoin and Ethereum investors are moving their crypto to interest-bearing accounts by the millions, according to a new report.
In just three weeks, Bloomberg says traders have already moved $35 million in BTC and ETH to interest bearing crypto accounts at BlockFi. The New York-based company is a secured non-bank lender that offers crypto asset-backed USD loans to asset owners who collateralize their loans with their crypto.
BlockFi launched crypto savings accounts on March 5th, offering an enticing 6% annual interest rate, which is paid out monthly in crypto and compounded to produce a 6.2% annual percentage yield.
That number is especially high compared to US banks, which have steadily offered lower and lower rates over the years. BlockFi CEO Zac Prince says the platform’s interest rate will fluctuate along with the price of Bitcoin and Ether.
“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.”
BlockFi says 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 BlockFi 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.
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 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, BlockFi is backed by a number of high-profile investors in the cryptosphere including Morgan Creek Capital, Galaxy Investment Partners, Coinbase, ConsenSys and Devonshire Investors, the private investment arm of the owners of Fidelity Investments, one of largest financial institutions in the world.