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Crypto Backed Loans: Who’s Using Them and Why?

Published 6 June, 2019

    Crypto-backed loans are one of the most popular tools in the crypto ecosystem. Not only are they available at rates that beat many traditional funding options, they provide crypto investors with a way to access the value of their crypto without having to sell. Structured just like any other collateralized loan, borrowers stake their crypto as collateral (security). The lender then funds the borrower a certain percentage of the value of the collateral. This is referred to as a loan-to-value (LTV) rate. At BlockFi, our loans offer LTVs up to 50% (or half the value of your collateral), starting at interest rates as low as 4.5%. Once the loan is paid off, the borrower gets their collateral back. It’s more or less that simple.

    We believe that offering more transparency into our products makes it easier for people to understand what they’re buying and how they work. This benefits not only the end client but the crypto ecosystem as a whole. Here are some interesting data points we wanted to share to help shine light on who is actually taking these loans and what are they being used for.

    How are people purchasing their crypto loans?

    Client-reported fund source for their crypto.

    An interesting thing to think about is how people are purchasing their crypto. More specifically, what funds they use to do so. The breakdown of our clients is as follows:

    • Job income (32.4%)
    • Personal savings (28.4%)
    • Crypto mining (19.4%)
    • Business revenue (12.6%)
    • Other (5.5%)
    • Company ICO (1.7%)

    As you would expect, the majority of people buy their crypto using their personal income and savings. What is interesting is that nearly one in five BlockFi loan clients are using proceeds from mining activities to get access to USD without having to sell their crypto. Similarly, 12.6% of our clients are using revenue from their businesses to get a crypto-backed loan.

    What are people using crypto loans for?

    Client-reported intended use of loan.

    The biggest obstacle to growing our business early on was that people didn’t know this sort of lending product was available. There was an education gap that we’ve worked hard over the last year to eliminate. The second was educating our clients on the best ways to actually use their loan to do things like improve their personal financial situations or expand their business. There are quite a few use cases for taking our a crypto-backed loan with a company like BlockFi.

    • Starting a business (29.2%)
    • General Expenses (20.1%)
    • Purchase more cryptoassets (17.9%)
    • Pay down debt (12.3%)
    • Purchase traditional investments (7.8%)
    • Purchase real estate (7.4%)
    • Other (5.4%)

    The biggest BlockFi loan client segment are for business purposes. Nearly one third of our loans go to entrepreneurs who are looking to start or expand a business. One anecdote we’re particularly proud of is that a number of these clients operate within the crypto industry. Another impactful segment of our clients are those leveraging our services to pay down higher-cost debt. For example, there are a number of BlockFi clients who have taken out a loan in order to pay off credit card or student loan debt. The biggest impact we can hope to have is to help people improve their personal financial situations.

    The number of loans we are originating is growing every month. We get a lot of questions about what BlockFi’s differentiators are. There are a few big things we like to highlight to potential clients:

    • BlockFi loan rates are guaranteed over a 1 year team. Unlike some of the DeFi alternatives in the space, the interest rates on our loans are not subject to change mid-term. Clients can refinance their loan and select new terms at no cost. Additionally, BlockFi loans start as low as 4.5%, the lowest rate in the industry.
    • Unlike some DeFi options, BlockFi funds USD directly into our clients’ bank accounts, providing a much more streamlined user experience.
    • BlockFi provides market-leading client service. Our team puts a priority on getting back to clients as quickly as possible. We are available during business hours at 1-646-779-9688 or over email at support@blockfi.com.
    • BlockFi is the only lender in the crypto ecosystem with institutional backing, which includes Galaxy Digital, Fidelity, Susquehanna, Akuna Capital, CMT Digital, Recruit Strategic Partners, Coinbase Ventures, SoFi, ​ConsenSys Ventures, and Morgan Creek Digital.
    • BlockFi is also a market-leader when it comes to regulatory compliance with lending licenses and consumer safeguards governing our transactions. We service clients worldwide, including 47 U.S. states.

    Taking out a USD loan backed by your cryptoassets is a great way to access the value of your crypto without having to sell. If you have any questions about how our loans work or how they can help you, please reach out to our team at support@blockfi.com.

    – The BlockFi Team

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    * BlockFi’s institutional partner, Gemini, provides secure custody for BlockFi client digital assets.
    * Rates for BlockFi products are subject to change. Digital currency is not legal tender, is not backed by the government, and BIA accounts are not subject to FDIC or SIPC protections. Products only available where permitted by law.
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    Disclaimer: Rates for BlockFi products are subject to change. Digital currency is not legal tender, is not backed by the government, and BIA accounts are riot subject to FDIC or SIPC protections. Security is our top priority. Please see our Vulnerability Disclosure Form and Bug Bounty Program.
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    Disclaimer: Rates for BlockFi products are subject to change. Digital currency is not legal tender, is not backed by the government, and BIA accounts are not subject to FDIC or SIPC protections. Security is our top priority. Please see our Vulnerability Disclosure Form and Bug Bounty Program.
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