$25 Million Crypto-loans In Two Week
March 21 2019 - 12:34PM
ADVFN Crypto NewsWire
Bitcoin Global News (BGN)
March 21, 2019 -- ADVFN Crypto NewsWire -- In January of this year
BlockFi began issuing a small number cryptocurrency backed loans.
But just two weeks ago, the company began a new service for
cryptocurrency custody, providing interest rates to retail and
commercial investors as high as 6.2%. In just two weeks, the
company has now issued $25 million in loans. This highlights one of
the biggest issues with the current fiat financial system that
fueled the grassroots growth of the cryptocurrency industry .
Traditional banks provide standard interest rates for savings
accounts that hardly even match the rate of currency
inflation.
Lending or
Savings
The BlockFi Interest Account (BIA)
is running at 6% right now, but this is not set in stone. Interest
is paid monthly in cryptocurrency directly to the customers
account. But this seems too good to be true. The headlines have
incited some deep research into how BlockFi is working behind the
scenes. There are two products available right now, loans, and the
saving account.
Institutional investors are allowed
borrow crypto under individualized terms with interest rates from
4% to 12%. BlockFi holds the right to call in the loans at any
time. And in times when crypto prices move dramatically, the
company manages risks by making borrowers put up more collateral or
selling some of it. For the savings accounts users have already
deposited more than $35 million worth of cryptocurrency. This
composed primarily of Bitcoin (80%), and the rest in
Ethereum.
Essentially, the positive for
consumers is that they are able to use their cryptocurrency in a
way similar to how the fiat system is established. However, BlockFi
does not maintain the same standards that banks due in terms of
insurance and guarantees. So, although 6% is very high, the
downside is that there is no real certainty that BlockFi will be an
enduring company. Further, the company has the right to change that
interest rate at their will.
The long term vision, is that
establishing this type of market for cryptocurrency will help major
financial institutions know the true value:
“The rate is a combination of the
market and customer acquisition costs. This product will be for
some amount of time, probably for for 3 to 18 months, a loss
leader. We are OK with losing money for a while. If it was purely
formulaic we probably wouldn’t have enough control to make sure
it’s attractive enough to a large amount of people to hit our
customer acquisition targets.” - CEO and founder Zac
Prince
By: BGN Editorial Staff
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