With interest offers on savings and checking accounts falling behind inflation, more and more attention is turning to alternatives(for excess cash) in search of higher yields. Two weeks ago, we explored a way to add a cash yield to securities held in your brokerage account. Investors in cryptocurrencies have a potentially more profitable option. Lets review BlockFi and see if they can increase the returns for investors in popular cryptocurrencies including Bitcoin and Ethereum.
Disclosure
This post contains either affiliate links or referral codes. If you chose to sign up for the service using the provided code, I may earn a small commission at no additional cost to you. Tools and services are evaluated relative to the value they can bring to your financial journey. The existence or lack of an affiliate program does not impact the services/tools I chose to highlight. The opinions expressed below are my own.
Special offer– If you use code c915e2b0at signup you will receive a $10 bitcoin bonus upon your first deposit of $100 or more!
Table of Contents
What Is BlockFi?
BlockFi is a decentralized finance platform that allows you to buy, sell, leverage, and earn interest in industry-leading cryptocurrencies. By holding your cryptocurrency within BlockFi, you can earn up to 7.5% interest with no minimum balance. We will delve into the roles BlockFi can play, but on a macro-level, the platform allows users to:
- Purchase stablecoins along with the leading cryptocurrencies, including Bitcoin and Ethereum
- Move invested money from one coin to another
- Earn interest in the cryptocurrencies you hold within the platform
- Take out crypto-backed loans
What Is the BlockFi Interest Account? How Much Can Interest Will I Earn With BlockFi?
BlockFi made a name for itself by offering an account that would pay interest upon your Crypto holdings. The current interest environment, regulatory attention, and time have caused the rates BlockFi offers to become somewhat complex. You can see their current interest rates here, but owners of Bitcoin and Ethereum can earn up to 4% while stablecoins are currently eligible to receive up to 7.5%. Interest rates operate under a tiered system wherein the first coins in each of your holdings earning the maximum rate. This is the inverse of many other financial accounts that reserve better rates for larger investors.
What Cryptocurrencies Are Supported by BlockFi?
BlockFi supports some of the largest cryptocurrencies by market share, along with several stablecoins. Stablecoins are often linked to, and aim to derive the lower volatility of, a hard asset. At the time of this article, BlockFi offer the following:
- Bitcoin
- Ethereum
- Litecoin
- Chainlink
- Basic Attention Token
- PAX Gold
- Dai
- USD Coin
- Binance USD
- Paxos
- Gemini USD.
Can I Automate Recurring Trades on BlockFi?
Yes! You can set your BlockFi account to purchase select cryptocurrencies and stablecoins automatically on a daily, weekly, or monthly basis. Monthly purchases must currently occur on either the 1st or 15th of each month.
BlockFi Security Review. Is BlockFi Legitimate? Is My Money Safe With BlockFi?
Holdings held on the BlockFi platform are held by Gemini Trust. Gemini was founded in 2014 and the New York State Department of Financial Services licenses their operation. While neither the FDIC nor the SPIC insure your portfolio, Gemini adheres to industry best practices to safeguard your holdings. Gemini holds 95 percent of its BlockFi’s crypto assets held offline in cold storage.
BlockFi was founded in 2017 and has a robust, diverse, and experienced leadership team. Co-founders Zac Prince and Flori Marquez continue to lead the team providing stability to the company. They have attracted strong investors and invest in SEC-regulated equities. In case of financial failure, client assets are prioritized above employees and equity. They are fairly conservative with the loans given out, securing 50% collateral against them.
Does BlockFi Support Two Factor Authentication?
Yes! BlockFi integrates with the Google Authentication app. This integration requires approval via your cell phone whenever anyone attempts to access your account, helping ensure it is you. Note that BlockFi does not require this of its users and does not enable this feature by default. To enable this additional layer of security :
- Sign in to your BlockFi account
- Click on your name at the top right of the screen
- Click on Profile Settings
- Navigate to the Security tab
- Click enable 2FA and follow the instructions
What Are the Tax Implications of a BlockFi Account?
BlockFi Interest Account– Interest earned through this account will trigger two taxable events. The year you earn the interest will trigger the first. Interest payments are made in the form of the coin you are holding (interest on Bitcoin will be paid in Bitcoin etc). You will need to pay tax at your standard income rate on the fair market value of the coins you receive.
The second will trigger the year you sell the cryptocurrency. Upon selling your holdings, you will pay short-term capital gains tax on any coins held for under one year. For any coins you held for longer than one year, you will pay tax at the more favorable long-term capital gains rate.
Blockfi Fee Structure Review: What Fee’s Does BlockFi Charge?
BlockFi has a reputation for providing a platform without fees. There is no minimum balance and no transaction fees, opening the platform to investors of all sizes. If you choose to use BlockFi to purchase or sell coins, you will notice a spread on every order. When you place a buy order, you might see a price slightly higher than the current market value. When you go to sell, you may see a price lower than the current market value.
This spread protects BlockFi and should fall within .5 and 1.5%. My experience has shown fees of ~1.05%.
Blockfi Card Review-Is the BlockFi Credit Card a Good Choice for My Wallet?
APR– 14.99-24.99%
Annual Fee– None
BlockFi has partnered with Visa to offer one of the first cryptocurrency rewards cards-the BlockFi Rewards Visa Signature Card. The card currently rewards users with:
- 1.5% back on all purchases
- This raises to 2% on all purchases above 50k annually
- The first $100 of purchases made within the first 90 days are rewarded at a rate of 3.5%
Additional Benefits for those on the BlockFi Platform:
- If you hold stablecoin, cardholders will earn an additional 2% APY
- If you trade on the platform, you will receive .25% of your trading volume back in bitcoin
- Up to $500 a month
Creatively, applying for the card triggers only a soft credit pull. Only after you have been approved and accepted the card is a hard credit pull implemented. This protects your credit score if your application is declined.
When the card was first announced, it carried an annual fee, which has since been dropped. The removal of this fee has elevated the card, but it still is overshadowed by other cards deserving a place in your wallet. Many of these cards will provide you with higher cashback while allowing you to invest the money into the asset of your choice.
What Is the BlockFi Bitcoin Trust
BlockFi’s Bitcoin Trust is only open to accredited investors(net worth over 1 million) so we will only touch on it briefly. The trust looks to provide a vehicle where high net worth individuals can incorporate bitcoin into their overall strategy without some of the cost and headache of direct investment.
The custodian of the trust is Fidelity Digital Asset Services and has a minimum investment of $50,000
Similar offerings exist for:
BlockFi Ethereum Trust
BlockFi Litecoin Trust
The custodian for both trusts is Coinbase Custody Trust Company.
BlockFi Mobile Support Review
The BlockFi mobile app is a fully-fleshed out platform allowing you to perform everything needed to manage your account. The app is currently rated 3.3 stars on the Apple App Store and 3.4/5 on the Google Play Store. Users are hoping for an updated UI and more free withdrawals per month.
How to Get Started on BlockFi
Creating a BlockFi account is a painless process. Remember to use code c915e2b0 to receive a $10 bonus upon your first deposit of $100 or more! You can create an account via their website or a mobile app available on the Google Play Store and the Apple App Store.
When setting up your account, they will ask you to provide some basic information:
- Legal First and Last Name
You will then be able to link to an external bank to fund the account. BlockFi leverages the industry-standard Plaid interface to securely connect to your bank. Information passed to and from your bank utilizes industry standard 256-bit encryption. BlockFi follows industry standards throughout this process.
Buying Cryptocurrencies on BlockFi
Buying supported coins through BlockFi is simple. You can pay with other crypto or stablecoins and the total you see is the total you will pay. Note the section on fees above. Because of the spread, you may have better options for buying or selling your coins. If you are looking for a simple way to buy or sell and would prefer to not leverage two separate platforms, BlockFi provides an acceptable option.
Final Review – Is BlockFi Worth Your Time?
Decentralized platforms such as BlockFi are still relatively new. Their business module may have to shift due to external factors, including risks of increased regulation. The underlying assets themselves construe an emerging asset class with its own inherent risks. If you are an investor in cryptocurrencies, you are aware of many of these risks. There is potential here, and we love layering additional passive income into our portfolios where possible. For holders of cryptocurrencies, BlockFi is worth a look.
Through this BlockFi Review, you now know how to earn passive income off of your crypto holdings! If you chose to open an account – Sign up at BlockFi and use code c915e2b0at to receive a $10 bitcoin bonus upon your first deposit of $100 or more!