Investing With BlockFi – Secure A Loan Using Cryptocurrency As Collateral

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If you are investing with BlockFi, you can secure a loan using cryptocurrency as collateral! Holy smoke! Why would any respectable institution trust something as volatile as cryptocurrency as collateral? Are they a scam? Insane? Who are these people and to whom to they give loans?

What Is BlockFi?

BlockFi is a company that acts almost exactly like a regular bank, but for cryptocurrencies. Specifically, Bitcoin, Etherium, and Gemini (GUSD).

Unlike banks that use government-backed money (fiat money), BlockFi isn’t subject to the laws or protection of banks that are members of FDIC or SIPC.

If that is a put-off, keep in mind that BlockFi wouldn’t be the trusted entity that it is if it were to engage in devious practices. Between July and October of 2019, BlockFi paid out over $2MM worth of crypto in interest and bonuses.

Why do I think BlockFi is trustworthy? As of now, they offer services worldwide, including 47 U.S. states. It is currently the only independent lender with institutional backing from such investors as Galaxy Digital, CMT Digital, Akuna Capital, Fidelity, Morgan Creek Digital, ConsenSys Ventures, SoFi, Coinbase Ventures, Susquehanna and Recruit Strategic Partners.

In other articles, I mentioned that I use Coinbase, so if they trust BlockFi, so do I.

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What Services Does BlockFi Offer?

I’m glad you asked. People looking for a trading platform may be disappointed with the relatively few digital currencies that BlockFi works with. However, someone looking for an interest-bearing account or a loan will be excited.

BlockFi Interest Account (BIA)

The BIA is what takes my interest. I had to say that. What I mean is, if someone invests their money in a BlockFi Interest Account they gain interest on their deposit. Simple enough, isn’t it?

The only downside for me is that I currently do not have any Bitcoin (BTC), Etherium, (ETH) or Gemini (GUSD). These are the three currencies that BIA works with. So, what should I do if I want to gain interest on my crypto?

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Depending on just how interested I really am, it’s simple. I use my Coinbase account, which holds all my crypto except the BAT to transfer one currency into a different currency. Maybe I’ll turn my Litecoin (LTC) into Etherium.

I then make an account with BlockFi and set up a BIA with my Etherium as the holding. Now, instead of having LTC sitting around in a wallet doing nothing, I have ETH in an interest-bearing account!

Hmmm. We wonder though, what kind of interest? It’s nice that I don’t have to pay for BlockFi to hold my crypto, but I wasn’t paying Coinbase, either. Will the gain be noticeable? My heart was attached to my Litecoin. I gave that up for BIA. WHY??? Should I hold regrets?

First, compound interest is paid on the first of each month. Compound interest is pretty standard with most types of banks. Each month, the interest paid on my account is based on what is currently in the account.

Suppose I deposited 30 ETH. Each month the interest makes that account a tiny bit bigger. My first month’s interest will be based on the 30 ETH. If I don’t add anymore ETH, my account will still grow. Each month, the interest will be paid based on the amount of what is currently therein, not what I initially deposited.

Here is the rundown based on annual percentage yield (APY):

  • BTC tier one, 0 – 5 BTC, 6.2 % APY
  • BTC tier two, over 5 BTC, 2.2% APY
  • ETH tier one, 0 – 500 ETH, 4.1% APY
  • ETH tier two, over 500 ETH, 0.5% APY
  • GUSD, any amount over 0, 8.6% APY

So, you tell me, given the current fiat value of these currencies, was my 30 ETH well-placed? Should I have used the stablecoin (GUSD) instead, keeping in mind GUSD holds its value as one coin = one dollar? I’m not good at math.

Crypto-Backed Loans (USD Only)

Okay, I mentioned I don’t trust myself with a loan for personal reasons. I believe BlockFi is trustworthy on their end. Here’s the scoop.

Just about any company who offers loans wouldn’t dream of lending real government-backed currency against Bitcoin, Etherium, or GUSD. The values of cryptocurrencies are far too volatile. They want cars, houses, land, or something else that has a fairly stable value.

Since BlockFi aims to bless the world with something different, they must take a different approach. They use what is called a loan calculator based on the value of the crypto you deposit.

First, there is a tiny form. Enter the amount of the fiat value, e.g., dollars, you want to borrow and the coin you are offering as collateral. The other side of the form will tell you how much of the coin they want in order to give the loan.

The minimum dollar amount of the loan is $5000. The example amount on their website is $25,000. The collateral required is 5.96 BTC. You’ll notice the current value of the BTC is significantly higher than the amount of the loan. So, just how much do you need those dollars?

Regardless of the amount of the loan, no credit checks are made and each loan is for 12 months. At the end of that 12 months, you have the option to either pay off the remaining balance or refinance.

There is no early payoff penalty. If you pay off the 12-month loan within a shorter time period the remaining interest on the loan is forgiven.

Before your loan is offered, you enter your information in a form that the website says will take you less than two minutes. You’ll be declined or approved, on average, within one business day.

If the value of your cryptocurrency highly increases during the payoff period it is kept in storage until the loan is paid. If the value has a serious decrease then you will have to add more currency to your account.

You can use your cryptoassets to make principal and interest payments any time.  BlockFi intends to add a feature that increases the value of your loan if the value of your collateral jumps significantly.



Other Valuable Information

Your cryptoassets are stored with Gemini, a licensed custodian. I’ll cover Gemini in a future article; for now, you can examine it here.

BlockFi does not offer financial or tax advice. You should consider using the advice of a professional financial advisor if you have any doubts.

When you log in to BlockFi, the dashboard shows a Refer a Friend button at the top right corner of the page. If you click it, you’ll see your code that you can share on any site. The referral program is generous enough to merit your consideration.

BlockFi posts a monthly update on their blog. I’d keep a close eye on it. There are no foreseeable problems at this time.

BlockFi shows their contact information on their homepage, and there are buttons to click that will show you the people at the head of the company. They don’t try to hide anything. I haven’t noticed any red flags.

They have an affiliate program, of which I am a member. I humbly implore that if you decide to make an account with BlockFi, that you come back and make your account through my link. It will cost you nothing more, everything will be the same for you as if you joined BlockFi through just looking up their website. Many thanks!


What are you thinking about BlockFi? Does it sound worthy of your assets? Do you know anyone who uses BlockFi or another interest-bearing crypto wallet or vault? Let me know how you feel in the comments below!

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32 Thoughts to “Investing With BlockFi – Secure A Loan Using Cryptocurrency As Collateral”

  1. Jonathon Howard

    I think this is very interesting seeing as how in an investor in crypto currency I’ve bought all mine in coin base what’s your over all out look if you don’t mind me asking what is your overall price prediction for the xrp coin ? Is this type of crypto currency available for purchase on Coinbase and does this coin have any connections with block chain 

    1. Cattington

      Hello Jonathon. I recently read an article on Coin Savage that believes XRP will go up dramatically at the beginning of 2020. Expert predictions aren’t always correct, but it’s a nice thought; I have quite of bit of money in XRP, and it is in Coinbase. I do believe that all cryptocurrencies use blockchain. I have an article about blockchain on my website. Thank you for the comment!

  2. Nimrodngy

    Hello. You really got me with this article. I will create an account following your link here. I want to invest in Bitcoin because this is the future now. 

    The thing that really amazed me is that BlockFi paid out over $2MM worth of crypto in interest and bonuses. This kind of informations gives me great confidence in this company. In this day all we need when we want to manage our money is confidence. 

    BankFi has already managed to offer this to me.

    Thank you for this article, and can’t wait to see more like this. 

    Keep in touch.


    1. Cattington

      Thank you for stopping by, Nagy. I’m so glad you found the article useful. Thank you for going through my link to make an account! The interest is impressive since it’s offered for crypto. Best wishes!

  3. Edwin Bernard

    I have a bitter taste of cryptos. Sadly I bought BTC in the late 2107’s when it was trading for about $10K. Then it crashed. Today it is getting closer to its value back then. 

    When one takes out a loan in a crypto currency, is it indeed to the USD? How would that work out if the repayment plan was in the same Crypto? It is the volatility of the crypto that makes me worried. 

    When buying a home in USD it is beneficial to the homeowner when the currency value drops. As the home value increases, the loan is paid back with lower value dollars.

    What happens in the case of borrowing in Cryptos? This is where I am confused. Is there a site I can go to that can answer all of my questions? Like within the BlockFi website?

    All the best to you.I apologize for my confusion.


    1. Cattington

      Hello Edwin, I appreciate your comment. The loan is indeed given in USD; you can pay it off with either USD or your crypto. They don’t loan crypto. Their website will definitely answer your questions. If not, they have contact information at the bottom of their pages. Best wishes to you!

  4. Joy gateru

    Wow! I never thought something like this could ever happen I think am very lucky today, I am already using the cryptocurrency and I am excited to know that I can obtain some loan and cryptocurrency being my collateral, I have to register now with the BlockFi, I really appreciate you for sharing this post am sure many pewho has reviewed this post have gain a lot from it, I am sure to subscribe to your newsfeed to learn more about this and other related articles, how long does it take for the loan to be approved? Can’t wait to apply for the loan.

    Thank you.

    1. Cattington

      Thank you for the exciting comment, Joy! I believe the approval process is within two business days, maybe only one, if they haven’t changed it.

  5. Rina

    I am no expert when it comes to cryptocurrencies, altcoins, bitcoin but I am very interested in the topic. I hold a few cryptocurrencies but none of them are currently earning interest. I have looked into Celsius which I think is similar to BlockFi. It certainly makes sence to use the strategy you explain here in your article. The more I read articles like this the more I learn. I certainly will consider moving some of my cryptocurrencies to BlockFi. 

    1. Cattington

      Thank you for stopping by, Rina. I’m glad you found the article useful. 🙂

  6. Robert Trevor

    BlockFi seems to be, an interesting way of getting a loan,but I wonder if it is trustworthy, for a beginner like me, who normally deals with banks ?

    I suppose they are trustworthy, if they have such customers, as Galaxy Digital,and Morgan Creek Digital,and trade in forty seven of the U,S, states,so my deal,would be safe and above board.

    Opening an account with BlockFi, appears to give you interest rates, that are very good, and they are stored, with a well known Custodian,so they are also safe,which makes it seem worthy, of trusting my crypto assets to them.

    I am glad, that there is a company like BlockFi, that acts almost like a normal bank,but that can handle my crypto currency, with professionalism,and with ease.

    1. Cattington

      Thank you for the thoughtful comment, Robert! I think investing crypto in BlockFi is a great idea. 🙂

  7. Great to read about this as I am into trading.

    I do trust blockfi as it is not regulated by government or banks because these entities eat out money too much so I would rather invest on something which has the future like Bitcoin.

    1. Thank you kindly, Thabo, for the comment. Bitcoin cash took a dive today. At first, I thought it was actually Bitcoin and I was going to freak at how low it is. Whew! Best wishes with your trading. 🙂

  8. Strahinja

    Wow, cryptocurrency is becoming more and more popular each day. I was unaware that there were banks for cryptocurrencies. As well as that you could actually loan a currency from there. I need to stay updated as this is becoming our future as each day goes.

    Love your website.

    1. Thank you very much, Strahinja! Crypto is, indeed, growing like a field of weeds!

  9. Benson

    It’s amazing seeing how fast cryptocurrency us growing andhhow goodaan investment it can be to anyone who goes into it. Only a few people are really investing in it and as a result can benefit form such great offer by Blockfi to get loans and use bitcoin and collateral. For me this is much better than using the normal collateral that are variously used by different banks over the year. Nice idea.

    1. Cattington

      Thank you, Benson, for your thoughtful comment! I believe BlockFi is really onto something with their practices. 🙂

  10. Henry

    I have been researching recently about DAI and Etherium. And they have a system in which you can lend from the system by putting ETH as collateral. So, it[s nice to read there are alternatives to that that I’ve been researching and one of them is BlockFi. I’ll open an account with them and test it out.

    1. Cattington

      Hello there, Henry! I believe I know exactly what you’re talking about. Coinbase allowed Dai to give members $20 in free Dai for opening a little account like that. I thought all the processes were too wordy and complicated, so I put my Dai back into my Coinbase wallet. Now it’s frozen as SAI until Coinbase officially turns it into MKD. It would be maddening if it was millions in BTC, but I don’t mind playing with stablecoin. Thank you for your comment. Best wishes with BlockFi!

  11. Ann

    This is a great option, to be able to receive a loan by placing our cryptos as collateral. I like it because as you have explained, I may have my cryptos months sitting in a wallet doing nothing. And there are business opportunities that have come up and I have had to exchange my cryptos in order to participate in some transactions. But having this option enables us to receive a loan and recover our collateral once the loan is paid.

    1. Cattington

      Hi Ann! It sounds like you are ready to become a financial advisor! Thank you so much for your comment.

  12. Gomer

    Okay, based on the points you’ve explained here, I’m convinced they’re not the bad guys. But having seen a lot of booms and busts in the world of cryptocurrency, it pays to be vigilant. Although crypto companies are free from the control of the banking authorities offline, at least there should be a governing institution to protect the consumers or the investors. Here in my country, I’ve seen people being bullied by online lenders, and being charged usurious rates for overdue balances. I hope this won’t happen to BlockFi customers.

    1. Cattington

      Hello again, Gomer! I tend to agree with you. Government involvement is a sticky business; they can protect consumers, but they also get over-involved and taxes go up along with their perceived importance. At the very least, here we have civil courts where you can sue for money you feel has been wrongfully kept or taken from you, even if there wasn’t an arrestable crime committed. Thank you for your comment!

  13. Jake

    hi, this is my first time hearing about this website. I am new to cryptocurrencies and I don’t have the time to research them I don’t know  if it’s an easy thing to get into and how many hours I would I need to invest to learn about it enough to make the right decisions and actually make money from it?

    I don’t know if it’s newbie-friendly. I also dont know how someone actually makes money with cryptocurrencies.

    For example, I don’t  know  if it ss it like normal stocks.

     This is a really great article that really explains it nicely.  Thanks very much.

    1. Cattington

      Hello, Jake! Cryptocurrency is a fun topic for me. I’m not a pro, myself. I invest a little here and a little there with the advice of my partner on this website, SonOfABitcoin. He knows a lot more than I do! I’ve never invested in the regular stock market, but people who do both say there are many differences and many similarities. I suppose if you figure one out, you can figure the other one out, as well. Feel free to check out one of these really inexpensive books if you’d like to learn a bit more in-depth. Thank you for your comment!

  14. Mark

    This is interesting, as I didn’t think anyone out there would offer loans against crypto. I’m pretty new to this whole thing, although I do have some Bitcoin, Etherium, and Litecoin. I might have to think about this a bit more seriously, since I’m thinking about buying some investment properties and might need a small loan to help cover a down payment. I could put my crypto into BlockFi and maybe go that route. Definitely something to think about. Thanks for sharing!

    1. Cattington

      Thank you for stopping by, Mark. It’s so cool you want to invest in properties. That’s always been a dream of mine. I hope you find BlockFi useful. Best wishes!

  15. Irin Ahmed

    Hi cattington, glad to read your article. Earlier 2017 I am also a crypto trader. But I have a bitter experience on crypto currencies when I was in trading. The site I invested was crashed. Leave it! Just shared my experience.  BlockFi seems to be, an helpful way of getting a loan. I hope they are trustworthy for people who has the wish to get in crypto world. I wonder to see Blockfi that there is a banks for cryptocurrencies. As well as they could actually loan a currency from here. They acts like a normal bank and can handle my crypto currency with care.

    I do trust blockfi as it is not scam. So I would rather invest on Blockfi which has the future.

    1. Cattington

      Hello, Irin. I am really sad to know your investment crashed. I hope you didn’t have too much in it. I can just feel the sick maddening disappointment. I hope it hasn’t embittered you to the long haul. Thank you so much for your comment. Best wishes!

  16. Nathaniel

    Hello Cattington – An interesting post.  I’ve heard about bitcoins only in passing which hasn’t sparked much interest on my part.  Having read this article along with your article , “Is Crypto A Scam? – Haters And Traders,” I’m now a bit curious with questions.  For one, how do you acquire crypto, do you buy it with dollars?  If so, what is the exchange rate?  How many Crypto’s to the dollar?  It’s interesting that it can be used as collateral. humm!  I’m also going to bookmark your website for future browsing.

    Thanks for this opportunity!

    1. Cattington

      Thank you so much for the kind words, Nathaniel. Crypto is acquired on platforms such as Coinbase or Uphold. They are bought with dollars or other national currencies or even other cryptocurrencies. There is no exchange rate – such as there is with fiat currency, e.g. dollars, yen, etc., but different platforms charge different fees for trading your fiat currency for crypto. Sometimes there is no fee for trading/exchanging one crypto for another, and sometimes there is. Feel free to stop by any time with more questions or comments! 🙂

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