Open Bitcoin Interest Account
About Bitcoin Interest Account
How to Earn Bitcoin Interest
Once you purchased Bitcoin, you can start immediately earning a high-yield interest. This is a unique advantage of Bitcoin, comparing to traditional asset classes. Generally, you lend your Bitcoin holdings to a Bitcoin lending company on predetermined financial terms. To start generating Bitcoin passive income, you need to sign up for the Bitcoin interest account and make a Bitcoin deposit. You will start earning a high-yield Bitcoin interest of up to 6% annually after the onboarding process is completed and your Bitcoin interest account is active.
What Are Bitcoin Interest Rates
Bitcoin interest rates are significantly higher than interest rates offered by banks, credit unions, and other financial institutions. You can earn up to 6% annually, if you keep your Bitcoin on the Bitcoin interest account. It’s worth mentioning that traditional financial institution pay approximately 1% annual interest rate on saving accounts in the United States. Therefore, Bitcoin interest account can generate on average six times more income than a regular savings account.
How Bitcoin Interest Is Paid
Bitcoin lending companies that borrow your Bitcoin, pay monthly interest also in Bitcoin. The Bitcoin interest may be compounded, meaning it’s added to the principal loan amount on the interest payout date, increasing the total Bitcoin loan return. The Bitcoin lending company is obliged to ensure the security and safety of your Bitcoin holdings and is liable for any potential losses. Bitcoin lending companies usually hold their Bitcoin reserves with a trusted Bitcoin custodian to mitigate potential security risks.
How Bitcoin Interest Account Secured
Bitcoin interest rates offered by Bitcoin lending companies are usually high, because lending companies are able to lend your Bitcoin to institutions with even higher interest rates. Those institutions prefer to borrow not to purchase Bitcoin to execute leverage trades where Bitcoin margin is required. Bitcoin lending company usually lends your Bitcoin to institutions on over-collaterized terms, keeps the margin, and therefore remains profitable. Over-collaterized terms mean that Bitcoin borrower provides Bitcoin lending company with a USD collateral, which value exceeds the loan amount.
New Bitcoin Financial Products
We believe that Bitcoin market infrastructure will become more developed over time. The Bitcoin market will become more efficient and regulated similar to traditional financial markets. Consequently, more Bitcoin based products such as Bitcoin exchange-traded funds (ETFs) will become available to institutional and individual investors. We think that the approval by the Securities and Exchange Commission (SEC) of the first Bitcoin ETF will become an important milestone in the Bitcoin market development and will trigger Bitcoin price appreciation.
Another type of financial products that are extremely important for the further Bitcoin market development are fixed income instruments and savings products, such as Bitcoin bonds and Bitcoin savings accounts. These financial instruments will allow Bitcoin holders to earn Bitcoin interest without selling their Bitcoin holdings. We firmly believe that Bitcoin fixed income market has huge growth potential.
We think that sooner or later the largest Bitcoin market participants will start issuing Bitcoin fixed-income debt instruments such as traditional Bitcoin bonds and zero-coupon Bitcoin bonds. This will allow companies that generate revenues in Bitcoin, such as cryptocurrency exchanges and Bitcoin miners, to issue fixed-income debt instruments nominated in Bitcoin, to finance their operations. Traditional Bitcoin bond is a fixed-income debt instrument that usually offers bi-annual interest (coupon) payments. The interest rate of the traditional Bitcoin bond is paid in Bitcoin.
Bitcoin zero-coupon bond is an unsecured fixed-income debt instrument similar to a commercial paper, issued by a company with the purpose of meeting short-time financial obligations. Unlike traditional Bitcoin bond, Bitcoin zero-coupon bond does not pay Bitcoin interest on an annual or semi-annual basis. Instead, this fixed-income Bitcoin debt instrument is initially offered and later traded at a discount, providing return to a bond holder at maturity, when it’s redeemed for the full face value. The interest rate depends on the credit worthiness of the Bitcoin bond issuer.
Bitcoin Savings Accounts
We will focus on the Bitcoin savings accounts as Bitcoin bonds and other Bitcoin debt instruments are still in the nascent stage of their development. The majority of Bitcoin holders currently store their Bitcoin in hardware and software Bitcoin wallets. For the sake of simplicity, Bitcoin wallet accounts can be compared to traditional checking accounts. On the other hand, Bitcoin interest accounts more resemble high-yield traditional saving accounts.
Why deposit Bitcoin to the Bitcoin savings account? Well, a reputable Bitcoin lending company can not only securely store your Bitcoin holdings but also pay you a high annual interest rate. Regular Bitcoin interest payouts can significantly increase the total value of your Bitcoin portfolio. We believe that over time Bitcoin savings accounts will become more widespread as a savings tool for Bitcoin holders. More companies will be providing a bundle of Bitcoin savings, Bitcoin lending, and Bitcoin custody services. This will be similar to a traditional financial market where banks provide such services with fiat currency.
How Bitcoin Savings Account Works
Bitcoin interest accounts, also known as Bitcoin savings accounts, are already available on the market. They provide a unique opportunity to generate an extra Bitcoin income. Some Bitcoin lending companies offer up to 6% annual rate to clients who are willing to deposit Bitcoin to an interest account. The interest rate can be compounded and paid monthly, directly to the Bitcoin interest account. We recommend to review and compare financial terms of different Bitcoin companies. This will help you to find the most suitable Bitcoin interest product.
High-Yield Bitcoin Savings Accounts
Bitcoin interest account as a financial product is becoming more popular among Bitcoin holders. Similar to savings accounts in the traditional banking system, Bitcoin savings accounts allow their holders to not only preserve their Bitcoin capital but also to earn Bitcoin interest. Indeed, this financial arrangement is convenient not only because it allows to generate up to 6% of extra income but also because Bitcoin lending companies have institutional level resources to secure your Bitcoin holdings.
About BlockFi Bitcoin Interest Account
What Is BlockFi Interest Account Rate
There are currently a few large players in the Bitcoin interest market, such as BlockFi and Celsius Network. We partner with BlockFi, which offers the most competitive annual Bitcoin interest rate of 6%. You can start earning Bitcoin immediately once your account is active. There are no minimum deposit requirements. Most importantly, you can not only earn Bitcoin interest but also ensure the security of your Bitcoin assets. BlockFi will securely store your Bitcoin holdings once you make a deposit on the Bitcoin interest account.
How BlockFi Interest Account Works
We will explain you how BlockFi generates revenue by using your Bitcoin deposited to the interest account. Actually, BlockFi takes your Bitcoin and lends it to institutions that need it for trading or hedging purposes. Importantly, they lend your Bitcoin on over-collateralized terms, meaning borrowers have to secure the Bitcoin loan with USD in the larger amount than the loan itself. BlockFi holds its crypto holdings with the custodian company Gemini. Gemini is a Qualified Custodian and a New York trust company regulated by the New York State Department of Financial Services, with excellent reputation in the crypto space.
Why Choose BlockFi to Lend Bitcoin
In short, you lend your Bitcoin to BlockFi by sending your Bitcoin to the Bitcoin interest account. They promise to return your Bitcoin amount and up to 6% of annual interest. Why should you trust BlockFi? This crypto lending company was founded in 2017 and secured around $50 million in venture funding from prominent institutional investors. As of Q1 2020, BlockFi received over $650 million in crypto deposits from their clients and managed funds with 0% loss rate. They currently generate multi-million revenues by providing Bitcoin lending services and have doubled monthly revenue in 2020.
Risks of Bitcoin Interest Accounts
The lack of regulatory clarity and oversight makes Bitcoin lending market less transparent and more exposed to compliance and regulatory risks. Bitcoin is not considered as a fiat currency or a security and hence is not strictly regulated by the U.S. government agencies as other asset classes. While Bitcoin lending companies use advanced risk management policies to mitigate potential losses, there are still non-zero risks of losing your Bitcoin capital.
Based on our research, the most significant risk in this rapidly growing space is a counterparty risk. Your Bitcoin interest account is not insured by FDIC as a savings account and there are still no regulatory guidelines that require Bitcoin lending companies to insure Bitcoin interest accounts. You can potentially lose your Bitcoin holdings in case of the Bitcoin lending company default, fraud, or mismanagement. We advise you to do a thorough research about the Bitcoin lending company and its management, before depositing your funds.
Besides counterparty risks, it’s always important to remember about investment risks. Bitcoin is a relatively new asset class and the Bitcoin market is not efficient and highly volatile. It’s possible that you will not earn any USD income even when holding your Bitcoin in an interest account. This may happen during the bear market conditions or because of a short-term Bitcoin price decline, depending on the specific term of your Bitcoin interest account allocation.
We assume that a long-term exposure to Bitcoin is a more preferable option for retail investors who do not have substantial investment expertise. Long-term exposure to Bitcoin can mitigate investment risks related to the short-term and medium-term volatility of the Bitcoin market. Most importantly, each investor needs to clearly understand its investment goals, investment horizon, and risk tolerance, before investing in the Bitcoin market. Bitcoin market is exposed to manipulation and Bitcoin is still a speculative asset class.
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