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My Experience Earning Interest With BlockFi – Update

Do you want to earn interest on your money, but savings account rates are too low at banks? BlockFi may be the answer with their offer of incredibly high interest rates.

You may be asking if it’s legit or what’s the catch to this.

If so, I’m your perfect guinea pig! I signed up for BlockFi and tested their BlockFi Interest Account to see if you can really earn that much interest on your money.

I’ll go over the pros and cons from my experience earning interest with BlockFi, along with how much I’ve earned so far. Let’s get started!

Ninja Note: With high-yield savings accounts offering rates not seen in over a decade, I recommend saving most of your money at these FDIC-insured accounts. The minimal increase in crypto yields do not warrant the additional risks.

This post may contain affiliate links, meaning I get a commission at no cost to you if you decide to make a purchase through my links. Visit this page for more information. The content on this page is accurate as of the posting date; however, some of the offers mentioned may have expired.

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Earning Interest With BlockFi

I was initially interested in BlockFi because they’re offering new users a $250 bonus for opening an account. Readers of The Money Ninja know that I never say no to sign-up offers – it’s how I make thousands of dollars every month.

My intention was to earn the bonus and close the account. But while my money was sitting in my newly created BlockFi Interest Account (BIA), I learned that I could earn a whopping 8.60% APY interest on my money by converting it to GUSD (more on that later).

Ninja Update: BlockFi has revised their rates. See the revised interest rate chart.

That crushes anything you can find at traditional banks. At best, you’re hoping for a rate of 1.0% or so over there.

I decided to keep my $20,000 deposit at BlockFi and sure enough, the interest kept rolling in:

Earning interest with GUSD on BlockFi
(Screenshot from BlockFi app)

In less than two months, I’ve earned $244.85 on my initial $20,000 deposit. The calculations confirmed I was indeed earning an 8.60% APY interest rate!

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How Is That Possible?

You may be curious how BlockFi can offer such attractive rates.

Part of that can be answered by understanding what BlockFi is – a crypto platform that lets people get loans and earn interest on cryptocurrencies.

It’s sort of like a traditional bank that lends out money at a higher rate (personal loans, student loans, mortgages) than the rate they give you for holding your money (savings and checking accounts, CDs, money market).

The difference in rates they lend out versus what they give is how banks make money. BlockFi is using that same concept with crypto.

But Isn’t Crypto Volatile?

Yes, crypto is very volatile.

You’ve probably heard how cryptocurrencies like Bitcoin have tripled in a couple of months time only to lose half of its value in short order.

If you’re only seeking to earn interest on your money and not invest/speculate in cryptocurrencies, I would avoid using Bitcoins and cryptocurrencies like it.

After all, it makes no sense to earn interest if you’re losing more money on your principal balance.

Instead, I would convert money into stablecoins only.

What Are Stablecoins?

Stablecoins are a specific type of cryptocurrency where the value is pegged to an outside asset, like the U.S. dollar.

Earlier, I mentioned that I converted my $20,000 into GUSD.

Gemini Dollar (GUSD) is an example of a stablecoin pegged to the U.S. dollar at a ratio of 1:1. That means 1 GUSD is worth $1.

It was created by Gemini and is widely considered the first regulated stablecoin in the world – regulated by the New York Department of Financial Services.

Which Cryptocurrencies Are Available On BlockFi?

BlockFi currently supports 15 cryptocurrencies:

  • Bitcoin (BTC)
  • Ethereum (ETH)
  • Litecoin (LTC)
  • Chainlink (LINK)
  • Uniswap (UNI)
  • Basic Attention Token (BAT)
  • PAX Gold (PAXG)
  • Dai (Dai)
  • USD Coin (USDC)
  • Tether (USDT)
  • Pax Dollar (USDP)
  • Binance USD (BUSD)
  • Gemini Dollar (GUSD)
  • Paxos Standard Token (PAX)
  • Algorand (ALGO)
  • Bitcoin Cash (BCH)
  • Dogecoin (DOGE)

Of those, only the following are stablecoins pegged to the U.S. dollar:

  • USD Coin (USDC)
  • Binance USD (BUSD)
  • Pax Dollar (USDP)
  • Tether (USDT)
  • Gemini Dollar (GUSD)

I chose to go with GUSD to earn interest because it’s not only pegged to the U.S. dollar, but it’s also back by U.S. dollars held in reserve at State Street Bank and Trust Company.

GUSD enjoys massive support by reputable investors and the Gemini exchange was founded by Cameron and Tyler Winklevoss, billionaires originally famous for their Facebook dispute with Mark Zuckerberg.

I also like USDC since it’s also highly regulated and established by a collaboration between Circle and Coinbase. The other three stablecoins are decent too, so I’m not saying GUSD and USDC is better. I’m just more comfortable with GUSD and USDC for the reasons I stated.

How To Earn Interest With BlockFi

Earning interest on BlockFi is simple.

After you open an account with BlockFi and deposit money into it, you’ll be asked which cryptocurrency you want to invest in.

Remember you only want to invest in stablecoins if you’re looking to earn money on interest and avoid the crazy price volatility of other cryptos.

With GUSD, you can currently earn 8.00% APY on deposits of up to $20,000. Deposits between 20,000 and 10,000,000 will earn at a rate of 7.00% while anything over $10,000,000 will earn 5.50% APY:

CurrencyAmountAPY
GUSD (Tier 1)0 – 20,000 GUSD8.00%
GUSD (Tier 2)> 20,000 – 10,000,000 GUSD7.00%
GUSD (Tier 3)> 10,000,000 GUSD5.50%
Earning Interest With BlockFi - GUSD Update
(Screenshot from BlockFi app)

Each cryptocurrency has its own interest rates offered.

There are no minimum balance requirements and interest is accrued daily and paid out monthly.

Things To Consider (Pros)

There are two things that make BlockFi really stand out.

The first is their superb customer support. I find them very responsive and helpful in answering any questions I may have. Some of their well-known competitors have done a really poor job in this department.

The second is that BlockFi was one of the first crypto platforms to offer compound interest. Compound interest is where the interest you earn will also earn interest in the following month, supercharging your savings!

For example, let’s say you invested $1,000 in GUSD.

At the current rate of 8.00% APY, you’ll have $1,080 at the end of Year 1. Then, in Year 2, you’ll earn 8.00% APY on both the original $1,000 that you invested and the $80 you made in the first month, and so on and so forth.

It’s a snowball of goodness.

Other pros to consider are:

  • ACH & Wire Transfers
  • No Early Withdrawal Penalty
  • One Free Crypto or Stablecoin Withdrawal per Calendar Month (for BTC, LTC, GUSD, USDC, BUSD, PAX, DAI, USDT)
  • Free Stablecoin Withdrawals to ACH Bank Transfers
  • Zero-Fee Trading
  • No Minimum Balance to Earn Interest
  • No Balance Caps

Things To Consider (Cons)

Most people would consider the main con of investing money in BlockFi for the purpose of earning interest to be the lack of FDIC insurance.

FDIC insurance protects your accounts at commercial banks and savings banks, up to $250,000 per account, in the event that the bank suddenly becomes insolvent.

While stablecoins are heavily regulated and hold reserves at a bank holding company, there are platform risks to consider. For instance, GUSD may be considered a safe stablecoin, but if the crypto exchange you use to hold them goes under, you’re at risk of losing some or all of your assets.

Other cons to consider are:

  • Withdrawal Times – Withdrawal requests have a one business day hold for security purposes and weekends don’t count, so plan ahead!
  • Monthly Payouts – I don’t mind monthly payouts, but some BlockFi competitors offer daily or weekly payouts.
  • Withdrawal Fees – After the first two free monthly withdrawals, any additional withdrawals in the same month will incur a small transaction fee.
  • Multiple Tier Rates – Now that all crypto interest rates are on tiers, you’ll have to manage your account a little closer to maximize the amount of money you can earn.

The Bottom Line

While I won’t put my entire savings into the BlockFi Interest Account, I do plan to keep $20,000 there to take advantage of the 8.00% APY rate offered on GUSD.

To me, this seems appropriate given that most of my free money (non-retirement/non-investment) are in relatively conservative accounts.

I have 36 months worth of expenses in an emergency fund. They’re being held in various places I had previously recommended to put your savings that you might need in one year or less.

I’m loving the high interest rate right now because if I had put this in a typical bank account, I would have earned less in an entire year with a saving account than I would investing in GUSD for a single month.

Before you take any action on what I’ve said here, please understand this is only my opinion. Everyone has a different risk tolerance.

And here’s my disclosure in case that wasn’t clear enough:

I’m not a financial advisor. The content on this post is for educational purposes only and merely cite my own personal opinion.

In order to make the best financial decision that suits your own needs, you must conduct your own research and seek the advice of a licensed financial advisor if necessary.

Know that all investments involve some form of risk and there is no guarantee that you will be successful in making, saving, or investing money; nor is there any guarantee that you won’t experience any loss when investing. Always remember to make smart decisions and do your own research!

8 thoughts on “My Experience Earning Interest With BlockFi – Update”

  1. Do you think we will ever get our money back from this company? I deposited into the USD and now I cannot withdraw my money!

    Reply
  2. John, you write:

    For example, let’s say you invested $100 in GUSD.

    At the current rate of 8.00% APY, you’ll have $108.00 at the end of Month 1. Then, in Month 2, you’ll earn 8.00% APY on both the original $100 that you invested and the $8.00 you made in the first month, and so on and so forth.

    Your example is an interest rate of 8% per MONTH (MPY) not per YEAR (APY).

    Reply
  3. Great post. I wondered your thoughts on some of the sites offering extremely high interest on stablecoins like Tether and USD Coin.

    Midas Investments appears to pay 19% APY Tether and USD Coin https://midas.investments/assets
    OKCoin 18.03% APY for Tether https://www.okcoin.com/earn (note interest does not appear to be paid in Tether)
    Coindx 14.01% APY for Tether https://coindcx.com/lend

    Tether and USD Coin seem relatively safe to me but I also feel like higher interest indicates more risk. I have no experience with any of these exchanges and see some coins with very high APY ranges like 128.04% APY for MIA on OKCoin.

    Reply
    • Thanks Charles! In my opinion, I’m much more comfortable with either USDC or GUSD since they’re not only pegged 1:1 to the US dollar, but they’re fully backed with dollar reserves held at a bank. I believe USDT is only like 5% backed and the token has never been fully audited.

      I primarily use Ledn and Gemini (with some in BlockFi and Celsius) to earn interest with stablecoins. They offer lower rates, but their lending practices are on a risk level I’m willing to accept. Other platforms like Midas are too risky for me to put a lot of assets in. Their rates are higher due to them making money with hedging/leveraging using risky algorithms. One bad turn and your assets could disappear overnight.

      Reply
  4. Any thoughts on the email that went out today regard BlockFi’s BIA?

    ———-

    I wanted to share a quick update with you to make sure you had the latest facts regarding the regulatory news from last week.

    From when Flori and I started BlockFi, we have had ongoing discussions with regulators as crypto is a new area for many and we knew there would be questions. We’ve said time and again that the key to our industry’s success is appropriate regulation. Ultimately, we see this as an opportunity for BlockFi to help define the regulatory environment for our ecosystem.

    BlockFi has a multi-faceted retail and institutional business, but the recent regulatory focus has been on the BlockFi Interest Account (BIA). We have been engaged in a productive discourse with regulators to protect your interests and expand accessibility to innovative financial solutions for all. This is our commitment to you — to fight for your rights to earn interest on your crypto assets.

    One update I want to share with you following these discussions is that the New Jersey Bureau of Securities (NJ BOS) has further postponed the effective date of its previous order to Thursday, September 2, 2021.

    While the NJ BOS’s order calls for preventing the creation of all new BIAs, it has no impact on current BIA clients or any of our other products. Rest assured, your access to BlockFi is completely unimpaired. We are fully operational for all of our existing clients worldwide, and you will continue to have access to all products, services, and assets on BlockFi.

    I want to extend a huge thank you for your confidence in us, and we will keep you informed as this process evolves.

    Zac

    Reply

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