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Do you know that your cryptocurrencies can be much more than a means to store the value of your assets?
Renowned cryptocurrency exchange BlockFi brings new and exciting use cases to the cryptocurrency space. Now, interested persons can have access to loans with their crypto assets serving as collateral while still holding on to their cryptocurrency. This article covers important aspects of BlockFi, a step-by-step guide on how to get collateralized loans, and other products in the BlockFi ecosystem.
Crypto lending and borrowing is becoming one of the most widely researched aspects of the blockchain and cryptocurrency space. As previously stated, BlockFi provides its users with access to loans with rates as low as 4.5% APR. Interestingly, such loans are borrowed against available crypto assets. Giving borrowers the opportunity to still hold their crypto assets and, therefore, retain their value.
While BlockFi is popularly known for its collateralized crypto-backed loan feature, the lending platform also boasts of several other important products. These products include:
- The BlockFi Wallet – provides its users with a secure way to store their crypto assets.
- Credit Card – with a 1.5% cash-back feature on all purchases made with the BlockFi credit card.
- A Trading Platform – making it possible for interested persons to trade the “King Crypto” and several other supported altcoins.
- BlockFi Interest Account – providing users with the opportunity to earn compound interest.
Step-by-Step Process on How to Access the BlockFi Collateralized Loan Feature
1. First, you need to set up a BlockFi account here.
You will need to fill in your legal first and last name, e-mail address, and also create a strong password. You can also input in a referral code if you have one. Then, confirm that you are at least 18 years of age. And have also read both BlockFi’s SMS policy and terms by ticking both boxes.
Lastly is to click on the “Submit” icon. Next, you will be prompted to verify your account from your registered email address. Once this is done, you now have a BlockFi account.
You will also be prompted to provide details like your date of birth, source of funds, type of account you need, how much crypto you plan to add to your portfolio each month, monthly transaction frequency, and other important questions. Then you need to verify your identity by uploading a copy of your ID and also by taking a picture of yourself.
You can also skip the above steps and simply log in if you already have a BlockFi account.
2. Fund your BlockFi wallet
Once opening and verification of your wallet are completed, you will need to fund your wallet. You can either fund your wallet using cryptocurrencies or by completing a wire transfer.
BlockFi currently supports a wide array of cryptocurrencies. Some of them include Bitcoin, Ethereum, PAX Gold, USDT, USDC, Geminin USD, Binance USD, etc. The different cryptocurrencies also have different APYs. USDT, for example, has the highest APY of 9.25% while BAT has the lowest of 1.00%.
3. Lastly, request for a loan
Cryptocurrencies that can be used to request a loan include Bitcoin, Ethereum, PAX Gold, or Litecoin. The loan usually has a duration of 12 months with an interest rate of 4.5%. Also, at least 50% of your crypto will be locked as collateral while receiving USD loans in form of stablecoins (USDC, GUSD, PAX).
For a client in the US getting a $10,000 loan will require:
- $20,000 worth of crypto as collateral. This is with a 50% LTV (Loan-to-Value) at a 9.75% interest rate.
- A 35% LTV ratio at a 7.9% interest rate will require $29,000 worth of crypto as collateral.
- 20% LTV at a 4.5% interest rate will require $50,000 in crypto as collateral.
For the same amount of crypto loan, an international client will require:
- 50% LTV at a 12.5% interest rate and $20,000 worth of crypto as collateral.
- 35% LTV at a 10.44% interest rate and also $29,000 in crypto as collateral.
- Lastly, a 20% LTV at a 6.73% interest rate and $50,000 in crypto as collateral.
Interestingly, loans will also require at least a 2% origination fee when the loan is paid back.
More on BlockFi Loans
A major step in getting collateralized loans on BlockFi is to first determine the size of the loan you want. And also the amount of collateral needed to service that particular loan amount.
For now, Bitcoin loans on BlockFi start at $5,000. This can, however, be expanded to loans of up to $10,000,000. The size of the loan amount you can access is dependent on your Loan-to-Value (LTV) ratio. LTV rates usually range between 20% to 50%. The lower your LTV ratio, the lower your interest rate will be, and vice versa. The interest rate is also dependent on other factors like your location, the requested loan amount, etc. Once the loan has been approved, your interest rate, payment plan, and collateral remain fixed. Except in the unlikely event of a margin call.
A margin call happens when the price of Bitcoin falls below a preset margin. To prevent this, you may need to:
- Add more crypto assets to your portfolio. This will help bring your LTV ratio to a healthier range.
- Pay up your loan balance.
- Lastly, ask that a part of your collateral be sold to improve your LTV ratio.
In conclusion, BlockFi makes use of Gemini’s custodial service to store crypto assets. Gemini also boasts of secure cold storage systems. And is also recognized by the New York State Department of Financial Services.
BlockFi currently has over one million verified users with over $10 billion worth of crypto assets in its care. It is also regulatory compliant with the United States. The firm also enjoys top-notch support from top investors like Galaxy Digital, Winklevoss Capital, Valar Ventures, Fidelity, etc.