In light of recent market declines, crypto lending firm BlockFi decided to increase interest rates for Bitcoin and Ether deposits.
CEO Zac Prince said BlockFi users holding 0-5 BTC will receive 6 percent of the annual percentage yield, while those holding up to 500 ETH will get 4.5 percent of the APY.
Meanwhile, stablecoins like the Gemini Dollar (GUSD) and the USD Coin (USDC) will maintain their 8.6 percent APY rates.
Why changing interest rates at this time?
With the latest Bitcoin crash due to the rapid spread of Coronavirus, BlockFi reported “extremely little liquidity.”
Accordingly, the lending company said: “they did not liquidate USD loan client collateral below a price of ~$4,500, despite the market reaching lows of ~$3,800.”
This makes the decision to increase interest rates surprising when taking into account how conventional financial firms respond to these changes in market.
It is worth mentioning that the Federal Reserve has cut interest rates to 0 percent.
The CEO sees hope in the crypto market, noting that BlockFi itself has maintained its perfect performance with no losses.
“Our balance sheet is stronger than ever and shifts in the institutional lending markets have created opportunities that expand our margin,” Prince said.
He added that BlockFi has handled the greatest number of daily deposits and withdrawals in its history.
“As the global economy weathers a number of headwinds, including the coronavirus pandemic, rest assured that at BlockFi we will remain a stable source of liquidity, while continuing to provide best-in-class wealth management solutions for our clients and the broader cryptocurrency market.”
Major investors in BlockFi
Investors are also eyeing the potential of the crypto lending space, as BlockFi has raised more than $48 million in two funding rounds in 2019 and 2020 with Bitcoin (BTC) and ether (ETH) loans. Major investors included Morgan Creek Wireless, Winklevoss Capital and Arrington XRP Capital.