Are you looking to put your crypto to work? Sick of your Bitcoin just sitting in a wallet doing nothing? Well the good news is you can now earn compound interest on your Bitcoin and Ethereum thanks to BlockFi.
BlockFi is a relatively new crypto lending platform. You can deposit your crypto to earn interest or you can take out a loan backed by crypto.
Earn Interest on Bitcoin and Ethereum
2019 has definitely been the year of crypto lending. Lots of new platforms have popped up. What makes BlockFi unique is that you can earn interest on Bitcoin and Ethereum and not just on StableCoins. Platforms like Dharma, only let you deposit stable coins (Dai and USDCoin). While this can have some advantages it also means you're letting your crypto sit idle doing nothing.
Previously, if you wanted to earn interest on your Bitcoin, you'd need to convert it to a stable coin first. I never wanted to do this because of the fear of missing out on any future gains on the price of Bitcoin.
So how much can you earn on BlockFi? Here are the interest rates.
BlockFi has two tiers. Basically if you deposit over a certain amount than the interest drops down. However for most people this won't be an issue (unless you've got a lot of crypto!). As with all investments though, I recommend starting small and getting to grips with how it works.
Take Advantage of Compounding
One of the most powerful wealth generating concepts is Compounding! They often say you gotta have money to make money. And that's thanks to compounding. BlockFi deposits your interest earnings on the first of each month. And yes, you'll earn compound interest. So as your balance grows you'll earn more and more interest aka the compounding effect.
How does BlockFi Generate Interest?
BlockFi earns interest by lending out your crypto. Basically they are acting like a bank, but doing so in the world of crypto. Anyone who wants to get a crypto loan on BlockFi, needs to put up twice the amount of crypto as collateral. That makes the lending more secure.
So why would people take out a loan backed by their crypto? Well if you're a crypto millionaire, you might not want to sell a large chunk of your Bitcoin in order to buy a new house or car. Especially if you believe the price of Bitcoin is going to go up. So instead, you leverage your existing crypto to get a loan. This scenario isn't unique to crypto. Stock traders do the same thing with their portfolio. Property investors do it buy taking out a mortgage on their existing properties to buy new ones and expand their portfolio. BlockFi is just making this available to the world of crypto investors.
BlockFi lends mainly to corporations and institutional investors. My feeling is they will have few defaults, even in market volatility (as these clients can handle that). And because you're crypto isn't being leant p2p in individual loans, any 1 default won't have a noticeable impact on your interest earnings. That said – this isn't a savings account. So due care needs to be taken.
How to start earning compounding Interest
- Buy Some Bitcoin or ETH or GUSD – Any exchange will do, I recommend Coinbase to new crypto investors as it's safe, secure and easy to use. (If you want a bonus $10 worth of Bitcoin you can use this link).
- Sign up to BlockFi here
- Verify Your Account – I had to fill out some basic profile info and verify my ID
- Transfer your crypto into BlockFi
- Start Earning Interest!
More ways to earn with your crypto…
- If you're interested in earning interest on StableCoins then I would recommend checking out Dharma – which requires no KYC and is super quick to get started with.
- You can trade your crypto. I recommend Binance for regular trading and PrimeXBT or SimpleFX for CFD trading.
- You can trade Stocks using Crypto – Abra has a wallet that lets you exchange crypto for stock CFDs.
- Or you can follow my number #1 investment strategy for bitcoin and just buy and hodl.