Crypto lending firms including Genesis and BlockFi are cutting the interest rates they pay on large-scale bitcoin deposits, potentially signaling an end to the glorified 4% to 6% levels that have served as a staple of the lucrative market.
Behind the cuts in the crypto interest rates, according to industry executives, is shrinking demand from big traders to borrow bitcoin (BTC) for easy profit opportunities. There is simply too much bitcoin supply in search of yield, relative to institutional demand. So the bitcoin lenders are protecting their margins by cutting deposit rates.
Starting Thursday, Genesis Global Trading, a full-service digital-currency prime broker, plans to refinance bitcoin deposit rates for institutional lenders and deposit-platform partners to a range of 2% to 3.5%, Matthew Ballensweig, lending director at Genesis, told CoinDesk in an email. Genesis is owned by Digital Currency Group, which also owns CoinDesk.
“We’re currently showing rates closer to 3.5% to 5.5%,” Ballensweig wrote. “Inflated rates are not truthful of the underlying market.”
Last week, BlockFi, a cryptocurrency firm, lowered rates to an annual percentage yield (APY) of 2%, from 3%, for accounts holding one to 20 BTC. The firm also introduced a new tier for accounts holding 20 BTC and above, paying just 0.5%.
“Rates at BlockFi reflect market conditions, which evolve based on a variety of factors, ” Zac Prince, CEO of BlockFi,