On November 28, 2022, BlockFi filed voluntary cases under Chapter 11 of the U.S. Bankruptcy Code. Additional information about our filing can be found on our blog here.
Perhaps you have come to the conclusion that cryptocurrencies are the way of the future, or perhaps you were carried away by the early waves of Bitcoin. If you are ready to advance as a cryptocurrency investor, BlockFi could be the next step for you to take. Check out our BlockFi review to learn more about this platform.
BlockFi’s mission is to offer institutional-grade financial products to cryptocurrency markets, which sometimes have limited access, regardless of whether you are a crypto user from the get-go or just intrigued enough to start investing.
Its goal is to provide customers with apps that are straightforward, low-cost, and geared to make the most of the potential of crypto assets. BlockFi is a leading example of a DeFi platform that provides users with interest-bearing accounts, loans with low interest rates, and a cryptocurrency exchange without any transaction fees. But can you trust BlockFi?
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Last Updated: Mar 22, 2023
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This BlockFi review will walk you through the functionality of BlockFi, including BlockFi crypto currencies, BlockFi loans, as well as BlockFi rates and fees, so that you are able to make an educated choice on whether or not you should use the platform. Let’s get started with our BlockFi review.
BlockFi is a wealth generating platform with a primary emphasis on cryptocurrencies. It offers a suite of goods and services, including a credit card and a wallet, as well as the BlockFi credit card. The cryptocurrency interest account product was the first offering from the firm, and it offered an annual percentage yield (APY) of about 4.5 percent on Bitcoin and up to 9.5 percent on stablecoins.
The company had to pay one hundred million in penalties to thirty-two states in the USA and not only that, but to the SEC also. And in order to bring its firm into compliance with the rules, they discontinued all BlockFi interest account offerings just to be in correct order with the investment company act of 1940.
Despite this, the offering was halted in February 2022. This company also operates as a crypto exchange, and is situated in New Jersey. The exchange gives the customers the opportunity to buy, sell and trade eight cryptocurrencies and also four stablecoins.
Several of the most successful investment companies in the world, such as Valar Ventures, Morgan Creek Capital Management, Winklevoss Capital, Galaxy Digital, Coinbase Ventures, Susquehanna Government Products, and others, have provided financial support to BlockFi.
The platform manages more than $10 billion in assets on behalf of over 1 million verified customers and 350 worldwide institutions. It is an excellent choice for investors who are interested in bridging the gap between conventional finance and cryptocurrency.
BlockFi is primarily a lending platform that provides individuals and companies with portfolio-backed loans to finance their operations. Users may earn interest on their cryptocurrency holdings by staking them in an account that pays interest.
The monies that have been staked are then used by BlockFi to provide crypto loans to borrowers at a greater interest rate than the rate that BlockFi pays to its crypto holders.
After you have established and validated your BlockFin account, you will be able to acquire any of the available BlockFi coins by first funding your wallet with any of the supported cryptocurrencies, stablecoins, or USD.
Simply opening a BlockFi Interest Account (BIA), into which you may deposit your coins and earn up to 9.5 percent annual percentage yield (BlockFi APY), is all that is required for you to start earning interest on your cryptocurrency holdings. Instead of selling your crypto assets, you can consider using them as collateral for portfolio-backed loans.
This is an alternative to selling your crypto assets outright. BlockFi may be accessed in a variety of nations, including the United States and Canada, among others.
The BlockFi Interest Account (BIA) is the platform’s flagship product and a top choice for cautious investors searching for a less hazardous approach to make passive income on their crypto assets. This account allows users to earn interest on their crypto holdings at a variable rate of return.
It functions in the same manner as a conventional savings or investment account in that it enables users to stake eight BlockFi tokens and receive compound interest on those coins. The only significant distinction is that it does not provide the same types of protection that are provided by banks and typical brokerage accounts, namely FDIC insurance and SIPC insurance.
Gemini Trust, a corporation that acts as a cryptocurrency custodian and is licensed by the New York Department of Financial Services, would instead hold and protect any crypto assets that you have stored in your BlockFi account.
The BlockFi Interest Account is accessible internationally in the majority of countries via a registration procedure that is uncomplicated and straightforward and complies with KYC and AML regulations. The account does not impose any hidden fees or minimum balance limitations, and withdrawals may be made at any time, with up to one withdrawal per month being free of charge.
You may anticipate to earn 5x-43x more with BlockFi than you would receive with the majority of conventional high-interest savings accounts. The annual percentage yield (APY) varies depending on the crypto currencies you own and changes based on market circumstances.
The interest on your BlockFi account is computed on a daily basis and applied to your balance on a monthly basis in the currency of your choosing. For instance, the interest rates offered by BlockFi on various cryptocurrencies may look something like this, Bitcoin up to 4.5 percent and Ethereum up to 5 percent.
You are able to get an approximate idea of how much you may earn on crypto assets before locking them inside your BIA by using the interest calculator offered by BlockFi. To receive an estimate of the interest and total crypto profits, all you need to do is choose the cryptocurrency coin you want to stake, input the amount you want to stake, and specify how long you want to keep it.
BlockFi has been successful in raising a total of $508 million, which puts a valuation of the new firm at $3 billion. The income that BlockFi has brought in over the previous year has increased by a factor of ten, putting the company on pace to bring in $100 million over the course of the next year.
BlockFi established itself as a very strong case and dominant entity in the overall FinTech space by amassing more than $2 billion in assets. This paves the way for BlockFi to become a frontrunner in the industry.
The company luckily was able to secure the financial backing in full power with the completion of the fundraising Series D that was worth over $350 million by some of the biggest investors such as Bain Capital Ventures, Pomp Investments and others.
BlockFi said in a news statement that it intends to use the influx of funds to investigate more options for innovation in its product portfolio, accelerate the company’s development into new markets, and maybe finance new opportunities for acquisition. Additionally, SoFi and Purple Arch Ventures contributed to prior funding rounds for BlockFi.
The group reveals that they have an expectation that they will be able to raise further financing in the not-too-distant future to support quick expansion and ongoing product development. The platform has over 265,000 retail consumers and 200,000 institutional clients as of 2021, and it reports monthly revenue of $50 million in 2021, which is a significant increase from the monthly revenue of $1.5 million recorded in 2020.
Morgan Creek Digital served as the lead investor in BlockFi’s Series C funding round, which resulted in the company’s successful acquisition of fifty million dollars. Other investors in the round included Winklevoss Capital, Kenetic Capital, Avon Ventures, Purple Arch Ventures, NBA player Matthew Dellavedova, and two educational endowments.
BlockFi was able to secure $18.3 million in Series A funding prior to its recent Series C funding round. This round of funding was led by Valar Ventures and also included participation from Winklevoss Capital, Galaxy Digital, and others.
You are able to purchase, sell, and make quick trades on a number of crypto currencies that are supported by BlockFi on the BlockFi exchange. Additionally, you are able to stake these coins in your BlockFi account in order to immediately accrue interest on them.
You are able to purchase at competitive rates using an ACH transfer from a bank account or conduct trades using coins that are stored in your BlockFi Interest Account that are completely free of charge. BlockFi also allows you to develop your cryptocurrency portfolio over time and weather market volatility with recurring purchase.
This is made possible with the platform’s support for dollar-cost averaging. You may automate your purchases of cryptocurrency by setting up regular purchases on a daily, weekly, or even monthly basis rather than making a single buy at a time. The very good news is that as soon as you make a purchase, your crypto tokens will be put into your BIA account, where they will instantly begin accruing interest.
BlockFi has many avenues that the company is actually making money from it. Its previous product, known as Interest Account, was a spread company.
The company usually generates the revenue when is borrowing capital firsly at one rate which is lower than the second one, and then lending it at a higher rate logically, with other words the interest rate it pays to users, and the interest rates it provides for BTC/ETH and other loans.
A post on the BlockFi blog explains that the majority of the company’s business is actually focused on providing institutional counter-parties with liquidity. These debtors include the following
Speculators and investment funds that are looking for possibilities to profit from arbitrage trading in a market that is fragmented. They do this by borrowing bitcoin in order to address the mispricing gaps that exist across various exchanges or marketplaces.
Borrowing money is a common practice for traders who use margin to fuel their trading techniques. Over-the-counter market makers, often known as OTC market makers, facilitate transactions between buyers and sellers who would rather avoid public exchanges but do so at a significant markup.
These parties are required to maintain a sufficient inventory of bitcoin in order to satisfy customer demand. Because holding cryptocurrency requires a significant investment of cash and is fraught with the danger of price volatility, OTC market makers will very often borrow money from lenders such as BlockFi in order to meet their requirements.
However there are other types of companies who want to provide their customers liquidity and so need an inventory of cryptocurrencies. Firms that keep the bulk of their cryptocurrency assets in cold storage and need some amount of liquidity to run on a daily basis fall into this category. Some examples of businesses that fall into this category are bitcoin ATMs.
Today, BlockFi continues to generate revenue via the spread of assets that are traded on its platform, the interest that is paid on the company’s loans, and numerous other schemes using its credit card account.
You are not required at all to liquidate your Bitcoin or Ethereum holdings in order to meet an urgent financial need. To assist its customers in accomplishing a variety of financial objectives, BlockFi makes available crypto-backed loans.
Up to fifty percent of the total value of your cryptocurrency assets may be used as collateral for a loan via BlockFi. Depositing cryptocurrency as collateral in Bitcoin, Ethereum, or Litecoin is all that is required to get a loan. You have the option of taking out a loan denominated in either USD, USDC, or GUSD.
The interest rates offered by BlockFi range from 4.5 percent to 9.75 percent, with an origination charge of 2 percent. This range is determined by the loan-to-value (LTV) ratio of the borrower.
It’s possible that funding may be provided to you on the same day that your collateral is received. As BlockFi does not impose any prepayment penalties, you are free to return your loan ahead of schedule at any time.
The BlockFi credit card is the very first credit card that offers incentives in the form of Bitcoin. It is a Visa Signature credit card that provides you with the best opportunity to earn cash back equal to one and a half percent of each purchase you make using the card.
A 3.5 percent cash back rate in cryptocurrency is offered as an introductory cash back rate during the first three months of card membership. This card does not charge an annual fee or a fee for making overseas transactions, which is also a great thing to be mentioned.
The BlockFi Visa card comes with a number of additional benefits, such as the following:
Your cash back earnings are immediately deposited into your BIA and will begin to earn interest as this process is complete.
When users purchase or sell supported BlockFi currencies on the BlockFi exchange, they are not charged any transaction fees by BlockFi. In addition, members are permitted one fee-free withdrawal of crypto and stablecoin each month.
In light of this, you should be aware that using the BlockFi platform will subject you to two distinct sorts of fees, namely:
If you need to withdraw money more than once each month, there will be a cost associated with each withdrawal. The amount of coins you wish to withdraw determines the flat withdrawal fee that BlockFi will charge you.
The following is actually the costs associated with withdrawing bitcoins from BlockFi: 0.00075 Bitcoin, or 0.02 Ether, in the case of Ethereum.
When you take out a crypto loan with BlockFi, you will be required to pay an origination fee equal to 2 percent of the total loan amount, in addition to interest rates that range from 4.5 percent to 9.75 percent, determined on the value of the cryptocurrency collateral you provide.
BlockFi is a legitimate cryptocurrency exchange that also functions as a loan platform. It is headquartered in New Jersey. The organization is properly controlled and is run in accordance with the guidelines set out by both the state and the federal government.
It also receives backing from respectable investors and top investment businesses. Even though the funds stored on the platform are not FDIC or SPIC insured, BlockFi does all in its power to protect your cryptocurrency assets and make sure that you have access to your money whenever you need it, including the following:
Gemini is a fully-regulated state custodian, so your cryptocurrency holdings are maintained safely in cold storage by Gemini.
This company keeps its cash reserves in third-party accounts with Coinbase, BitGo, and Gemini.
A self-service security tool known as the “Allowlisting function” that gives users the ability to prohibit or limit withdrawals to a certain address.
In order to reduce risk, loans have to be guaranteed by an LTV of up to fifty percent.
Given the evidence presented here, it is reasonable to conclude that BlockFi is a trustworthy and legitimate platform that satisfies the requirements set out by the government and the industry for the purpose of protecting users and investors.
Even if we have faith in a company, which there is nothing to suggest cannot be placed in BlockFi’s hands, the apocalyptic “what if” scenarios continue to occupy prime mental real estate in our minds. We probed the BlockFi crew with some end-of-the-world inquiries.
Gemini is BlockFi’s principal custodian you should know that BlockFi alone doesn’t hold any private keys directly.
Gemini is BlockFi’s primary custodian. Gemini insures the overwhelming majority of its assets via Aon and stores the vast majority of them in cold storage.
Gemini is regulated in the USA, more precisely in NY and it’s a licensed custodian. They just got back the results of the SOC2 Type 1 compliance audit that Deloitte performed on their custody solution. Users are strongly encouraged to learn more about Gemini’s security measures.
The following are the consequences of a hijacked user account. Since it first opened its doors, BlockFi has never had any of its users’ cash go missing. In the event that our security procedures detect that the account of a user has been hacked, as they have done in the past, they will immediately freeze the user’s account for a period of one week.
The next step is to have a videoconference with the person who was impacted so that we can confirm their identification. After that, they will be able to modify both their email address and their password in order to give them back control of their account.
When they lend crypto assets to create income, they have an incredibly extensive risk management and credit analysis mechanism in place.
Only substantial, well-capitalized, institutional borrowers or counter-parties prepared to deposit collateral and give the capacity to margin call them 24 hours a day, seven days a week are eligible for a loan from the company.
That is to say, if they lend $1 million USD worth of Bitcoin to Firm XYZ, then Firm XYZ must provide security for the loan in the amount of about $1.2 million USD. This represents an interest rate of around 120 percent.
They would utilize the borrower’s U.S. dollar collateral to acquire cryptocurrency in the event that the loan went into margin call and the borrower was unable to supply extra collateral (default).
BlockFi and Coinbase are both cryptocurrency exchanges that are situated in the United States. Coinbase is a publicly listed firm, in contrast to BlockFi, which is privately owned and operated.
Coinbase provides cryptocurrency exchange and brokerage services, while BlockFi operates more like a traditional bank and offers cryptocurrency loans and accounts that earn interest. On Coinbase, you can trade more than one hundred cryptocurrencies, while BlockFi only allows eight.
To reiterate, BlockFi does not impose any trading fees on its exchange, in contrast to Coinbase, which has a complex and pricey fee structure.
Next in our BlockFi review we’ll cover the BlockFi pros.
BlockFi Interest Accounts (BIA) provide consumers the ability to start receiving an income on their digital asset investments immediately after opening the account.
The crypto-backed loans offered by BlockFi allow investors to have access to U.S. cash while still maintaining their holdings in cryptocurrency as collateral for the loan, so avoiding a taxable event.
The trading capability of the wallet makes it possible for investors to exchange more than 20 digital assets in a smooth manner.
Next in our BlockFi review we’ll share some BlockFi cons.
BlockFi was compelled to shut interest accounts for clients and people located in the United States after receiving a cease-and-desist order from the SEC.
BlockFi Wallet, in contrast to the most of the prominent multi-asset software wallets, only supports a little bit more than 20 different assets.
Not convinced BlockFi is right for you? You might consider using another crypto exchange, such as:
Thanks for checking out our BlockFi review!
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Since the interest rates on BlockFi are variable, this means that they alter on a monthly basis. At the moment, owners of Bitcoin may receive an interest rate of 4.5 percent on amounts up to.10 BTC. When a Bitcoin holder reaches the threshold of 0.10 BTC, the transaction fees are reduced to 1% from the original 2%. There is also a third tier, which requires an investment of at least 0.35% BTC and results in profits of just 0.25% of the initial investment. Ether, Litecoin, Chainlink, and other cryptocurrencies all have tier systems that are quite similar to this one. Stablecoins, on the other hand, give substantially higher interest rates, ranging from 8% all the way up to 40,000 in the stablecoins themselves. After then, it reduces to 5% from what it was before.
Is BlockFi protected by the FDIC. Your savings in BlockFi are not protected by the Federal Deposit Insurance Corporation (FDIC) since the FDIC insurance policy does not cover digital assets such as cryptocurrencies. However, BlockFi employs its partner firm Gemini as its custodial service. Gemini does have its own insurance for its accounts, thus BlockFi's savings are safe in that regard. However, this should be taken with a grain of salt since BlockFi has not yet been hacked for user cash, insurance is only as good as it works, and it has not yet been decided whether or not this will happen.
BlockFi is able to turn a profit because of the spread between the interest rates on their loan accounts and their interest account rates. This means that the company takes a percentage of the difference between the interest rates it charges on cryptocurrency loans and the interest rates it pays out to cryptocurrency lenders. As was discussed earlier in this article, BlockFi offers its customers the ability to borrow Bitcoin at interest rates of up to 9.75 percent, while those customers who have interest accounts are only getting between 3 and 6 percent on their Bitcoin holdings.
Yes. BlockFi provides users with an interest-free wallet option. Keep in mind that since it is not a non-custodial wallet, it does not give a lot in the way of self-ownership, so you should not place too much stock in it. You may use the BlockFi wallet as a simple storage solution for your money while you figure out what to do with it and for a short amount of time while you do so.
BlockFi's custody is handled by Gemini, a well-known and regulated cryptocurrency exchange situated in New York City. Gemini is also responsible for BlockFi's security. The overwhelming bulk of the digital money that Gemini stores is done so using a technique known as cold storage. Cold storage refers to the offline storage of digital currencies. While deposits made to BlockFi are not covered by the FDIC, Gemini does have insurance on a portion of the monies that it keeps on its users' behalf and for which it is responsible. Only the monies that are kept in Gemini's hot wallets are protected by this insurance coverage.
Even while BlockFi and Coinbase are both solid solutions for novices, each service is best suited for a different set of circumstances. BlockFi is a comprehensive, all-in-one platform for financial services that offers loans and financial counseling to its customers. To take advantage of the interest-bearing accounts offered by BlockFi, many of the platform's customers move cryptocurrency from other platforms into their BlockFi accounts. Because of this, BlockFi is preferable for customers who wish to keep onto their cryptocurrency rather than constantly purchasing and selling it. Coinbase, on the other hand, is compatible with a greater variety of cryptocurrencies, allowing users to more easily diversify their holdings. Coinbase and Coinbase Pro are the go-to platforms for investors looking to purchase, sell, and educate themselves about cryptocurrency. However, users often sign up for BlockFi accounts in order to make use of the capabilities offered by both platforms.