BlockFi, a startup that provides USD loans in exchange for cryptocurrency holdings as collateral, just expanded the list of cryptocurrencies it accepts. As a first step, the company launched support for Litecoin (LTC) and Gemini (GUSD) stablecoin.
BlockFi Allows HODLers to Reap Benefits from Surge in Cryptos
Typically, the only way for cryptocurrency investors to profit from their holdings was to sell them. And given the current bullish sentiment, many investors are HODLing, meaning they’re not ready to part with their cryptocurrency.
In this climate, startups like BlockFi have emerged. While most banks are still skeptical about cryptocurrency, BlockFi and others startups help cryptocurrency investors access financing. In exchange, they take Bitcoin (BTC) and other cryptocurrencies as collateral.
Launched in 2017, BlockFi has received backing from ConsenSys Ventures, SoFi, Kenetic Capital, among others. In July 2018, Michael Novogratz’s Galaxy Digital Ventures LLC invested $52.5 million in the startup.
Eventually, BlockFi plans to accept the top 10 biggest cryptocurrencies based on market cap. In addition to taking Gemini (GUSD) stablecoin and Litecoin (LTC) as collateral, BlockFi also offers them as loans.
GUSD Allows BlockFi to Operate 24/7
Instead of adhering to US banking hours, BlockFi can provide loans round the clock with LTC and GUSD-based loans.
Gemini is a cryptocurrency exchange backed by the Winklevoss twins. Last month, they announced the launch of GUSD, the Gemini exchange’s stablecoin. More specifically, a stablecoin is a cryptocurrency tied to a fiat, meaning a government-backed currency like the Euro or the US Dollar.
The Gemini (GUSD) stablecoin, which is hosted on the Ethereum blockchain, is tied to the US Dollar. The Gemini trust company holds deposits in US dollars at a one-for-one rate corresponding to the GUSD in circulation. Moreover, the New York Department of Financial Services regulates GUSD and supervises its operations.
This stablecoin is a good way for users to send US dollars through the Ethereum blockchain. And recently, GUSD has increased in value while Tether (USDT), another high market cap stablecoin, dropped in value.
By contrast, Litecoin (LTC) forked from Bitcoin to create a faster cryptocurrency. This week, Gemini the exchange announced that you can now trade Litecoin (LTC) on its platform. Additionally, you can buy Litecoin on Coinbase.
BlockFi’s Lending Conditions
BlockFi claims to be one of the lowest-cost crypto lenders in the US. According to the company’s website, its standard interest rate varies between 10% and 13%. This is close to the average interest rate on personal unsecured loans for people with excellent or good credit score.
BlockFi has a loan-to-value (LTV) ratio of 35%. This means that the loan value can represent 35% of the value of the collateral cryptocurrency. Moreover, this allows the company to minimize its risk when it comes to large swings in cryptocurrency value. At the same time, clients have more breathing room in case of cryptocurrency market volatility.
To deal with major swings, BlockFi has set a system of trigger events. For instance, if the cryptocurrency price drops and the LTV increases, the client has to supply more collateral. Conversely, if the cryptocurrency price increases, it remains in cold storage until the repayment of the loan.
The addition of Litecoin (LTC) and the Gemini (GUSD) stablecoin is a major step for BlockFi. Adding support of new cryptocurrencies as collateral should increase its client base, which includes individuals and corporations.
Additionally, it provides more exposure to the multi-billion dollar cryptocurrency market, which, according to the CEO of Binance, will continue to grow.