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BlockFi Raises Rates Three Days After FTX Bailout

The company claims the raise was made possible by strong risk management.

BlockFi Raises Rates Three Days After FTX Bailout
Shutterstock cover by T. Schneider

Key Takeaways

  • BlockFi is increasing its interest rates on BTC, ETH, and stablecoins.
  • The company claims the rise in rates is made possible by its effective risk management strategies, decreasing market competition and changing macroeconomic yield conditions.
  • The announcement comes three days after BlockFi secured a $250 million loan from FTX to “bolster” its balance sheet.

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BlockFi is raising the yield on its Bitcoin, Ethereum, and stablecoin lending products three days after FTX extended the company a $250 million revolving line of credit.

The Powers of “Effective Risk Management”

BlockFi will soon be raising the interest rates of their lending products.

According to their official Twitter account, the crypto lending company will be increasing its rates across all tiers for Bitcoin, Ethereum, and major stablecoins such as USDC, USDT, GUSD, PAX, and BUSD. 

Yields on Bitcoin will be increased by 0.5% to 1.9%, Ethereum by 0.5% to 1.75%, and stablecoins by 0.5% to 3%. This brings rates for Bitcoin and Ethereum to a range between 2% and 3.5%, and stablecoins from 6% to 8.75%. The increase will be effective at the beginning of July.

The company will also be lowering their withdrawal fees by $1 for Bitcoin, $2 for Ethereum and $25 for stablecoins; on the other hand, it will entirely remove its “one free withdrawal per month” policy. 

BlockFi said it was able to increase interest rates thanks to effective risk management, decreasing market competition, and changing macroeconomic yield environment. It pointed out, for example, that it had never had exposure to UST or stETH, and stated that “as crypto market volatility increased in May and June 2022, BlockFi was among the first to de-risk our credit and market risk exposure.”

The announcement notably did not mention the $250 million loan the company received from crypto exchange FTX just three days ago. The loan had been extended to “bolster” the firm’s balance sheet and platform strength.

The company had previously laid off 20% of its workforce and liquidated a loan made out to prominent crypto hedge fund Three Arrows Capital. A leaked financial statement also showed BlockFi had lost more than $285 million over the past two years. Though its authenticity is unconfirmed, the document has reinforced rumors about the firm’s financial struggles.

Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies.

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