Crypto lender BlockFi has announced adjustments to its interest rates on account balances for bitcoin (BTC) and ether (ETH).
The startup, through its monthly update published Tuesday, May 21, has informed customers that accounts whose bitcoin (BTC) balances are more than 25 BTC will benefit from 0.15% increase in interest rate.
On the other hand, interest rates for accounts whose ether (ETH) balances the range between 25 and 75 ETH will drop from 6.2% to 3.25%.
The interest rates for accounts with bitcoin balances of between 0.5 BTC and 25 BTC remains unchanged, the firm noted. However, accounts with more than 100 ETH stand to earn an annual percentage yield (APY) of 0.2%
BlockFi has explained the move by noting that the lending environment for the two cryptocurrencies has changed, with that of bitcoin flourishing while ETH’s has floundered.
In particular, cryptocurrency exchange Poloniex offers ether at a 0.01% borrowing rate. The same rates apply at crypto lending startup Compound, while it only made up 3% of Genesis Capital’s portfolio in Q1 2019.
According to BlockFi, its adjustments in interest rates correspond to the above scenarios.
When it launched its interest-bearing accounts for BTC and ETH on March 4, BlockFi’s interest rates for both cryptocurrencies was 6% APY. That however changed within three weeks when the crypto-lending firm lowered interest rates for top deposit accounts.
The initial rates for both accounts were set at 6.2%, slightly higher than what BlockFi had noted earlier.
But in its announcement, the startup said that it would cut the rates from 6.2% to 2%, with the reduction affecting BTC accounts with more than 25 BTC or ether accounts with over 500 ETH. The changes were set to take effect in April.
At the time, the above cuts did not affect a majority of account holders, with 75% of all the BTC and ETH accounts reportedly having balances lower than 5 BTC or 150 ETH.
Some industry players have sharply criticized BlockFi for the manner in which the firm’s terms and conditions allow it a free hand at setting interest rates on a monthly basis.
For instance, critics have said that the company’s advertising has very little to do with its policy. The founder of law firm Silver Miller, David Miller, noted that BlockFi’s T&Cs “shows that their advertising is not necessarily what they’re guaranteeing.”
He added that it would not be surprising to see people “confused” when the 6.2% rates didn’t materialize. According to him, the company’s advertising makes it appear as if the rates are “guaranteed,” (and they are not).
Gemini Trust Company, regulated by the New York State Department of Financial Services (NYDFS), is reportedly the custodial provider for BlockFi’s assets. Customers can withdraw all their assets at any time once they place a request for the same.
Disclaimer: This is not investment advice. Cryptocurrencies are highly volatile assets and are very risky investments. Do your research and consult an investment professional before investing. Never invest more than you can afford to lose. Never borrow money to invest in cryptocurrencies.
