Will BlockFi, Ledn and Nexo rates trend lower?
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Will BlockFi, Ledn and Nexo rates trend lower?

All three firms have their own unique business model and here is how they stack up against one another.

The “nexo vs blockfi reddit” is a question that has been asked many times. The answer is yes, but the rates may trend lower in the future.

Getting a return on crypto is becoming more difficult. The collapse of the Terra ecosystem, which resulted in the loss of up to $50 billion, led to a drop in interest-bearing decentralized finance (DeFi) protocols.

On the other hand, centralized finance, or CeFi, in which all activities are routed via a single body, has had a very calm bear market, despite the fact that interest rates are falling.

Investors who have an account with a CeFi provider such as Ledn, Celsius, BlockFi, or Nexo often get emails describing the interest rate for the next month on the first of the month.

Since the bull market of 2021, the interest given by CeFi providers has decreased, which is a setback to individuals searching for passive income. Giving up custody of a crypto asset in exchange for a pittance of interest has prompted some crypto fans to reclaim ownership of their private keys, drawing parallels with traditional banking.

Three of the top custodians of Bitcoin (BTC) and crypto assets have declined in the table below, when both the interest rate and the amount of interest paid on each asset are taken into consideration.

Will BlockFi, Ledn and Nexo rates trend lower?Over the last year, CeFi interest rates have essentially trended downward. Data was gathered from the websites of each supplier.

Cointelegraph met with three of the major lenders of Bitcoin and other crypto assets to learn if CeFi providers’ interest rates would ever reach rock bottom, i.e. 0.01 percent, as banks do, and why these lenders and interest providers exist. 

Interest rates will remain favourable for the foreseeable future.

While interest in crypto is limited, representatives from Ledn, Nexo, and BlockFi concurred that it outcompetes traditional lending. “We are still five to ten years away from Bitcoin rates approaching even near to those of fiat bank accounts,” Mauricio Di Bartolomeo, co-founder of Canada-based Ledn, told Cointelegraph.

“Most traditional bank savings accounts pay out just a few basis points” (between 0.01 percent and 0.05 percent ). As of now, the interest rate on our Bitcoin Savings Account product is at 5.25 percent APY for the first 0.1 BTC and 2% APY for balances over 0.1 BTC.”

Di Bartolomeo said in a twitter thread that “changing market circumstances” have forced lenders to lower their rates as the difficulty level of profiting from arbitrage possibilities and the futures basis trade has increased.

Simply put, this indicates that market makers’ average returns are being constricted as well.

As a result, they are forced to reduce their borrowing costs.

May 4, 2022 — Mauricio (@cryptonomista)

“Yield connected to crypto interest-bearing accounts is influenced by a lot of variables, including market mood, funding rates, supply and demand, and balance sheet optimization,” said Jonathan Haspel, senior institutional trading associate at BlockFi.

Since the March 2020 meltdown, crypto market sentiment has fallen, and financing rates, especially for altcoins, have decreased to “worrying levels.” Haspel elaborated:

“Compressed rates and volatility are, in the end, signs of the asset class’ development.” There are more participants in the crypto game fueling its competitive funding and ubiquitous access, where yield was previously abundant and liquidity was formerly scarce.”

Bullish on CeFi: The future seems promising.

According to Cointelegraph, BlockFi CEO Zac Prince is still “bullish on […] customers’ willingness to earn crypto income for the long run.”

“The times, they are a-changing,” said Nexo co-founder and executive chairman Kosta Kantchev to Cointelegraph, “but crypto returns are still multiple times greater than those of conventional banks.” Kantchev, referring to the price of Bitcoin, which has been hovering around the $30,000 level, said:

“While interest rates on certain assets have stabilized, this is a reflection of the assets themselves. I believe that the sky-high rates on some of the newest assets on the market are mostly overlooked.”

Finally, and in accord with Di Bartolomeo, “the potential is always there, regardless of how historically volatile crypto has been.” CeFi providers will continue to provide more enticing interest rates than traditional banks.

It’s worth noting that Nexo uses a different approach, which might explain why rates aren’t lowering officially (as shown in the above table). Users that lock up the asset or maintain a part of the Nexo token get greater interest rates. Kantchev, unlike the other CeFi lenders, explained:

“Rates aren’t going down.” More importantly, although the yields on older cryptos on Nexo are guaranteed to be sustainable in the long term, the eye-popping rates are often accessible either with Nexo Tokens via our loyalty program or for some of the younger currencies for which we can earn such spectacular yields.”

Adoption and innovation are increasing, and regulation is on the horizon.

The fact that rates are falling should not be reason for concern: Not only are centralized institutions “essential to the acceptance and growth of Bitcoin as immaculate collateral,” but traditional banks may want to “associate” with CeFi participants in the future, according to Di Bartolomeo. He said, “

“This implies that centralized lenders, such as Ledn, will operate as a conduit to transfer legacy money to Bitcoin, benefitting both Bitcoiners (by allowing them to borrow at ever better rates) and capital providers (by providing a high risk-adjusted return).”

Is it possible for DeFi and CeFi to coexist? Three key conclusions from the panel of experts

“CeFi presents a compelling use case supporting crypto’s story for global monetary access,” BlockFi’s Haspel concurred. BlockFi expects “an rise in worldwide demand for risk-managed crypto products — such as interest accounts — in other new digital assets” in spring 2022, despite the tumultuous seas the crypto sector is treading.

“While credit checks and a lack of financial history impede those seeking worldwide access to cash, CeFi financing provides a solution.” CeFi methods can swiftly verify ownership of crypto assets since they are verified on a transparent and immutable ledger.”

Innovation, consumers, and new goods are all on the horizon for Kantchev: “Compliant, sustainable interest products that fulfill regulatory advice while successfully paying clients will be one of the next such items,” he says.

“The sector has advanced considerably, […] and I’m certain we’ll continue to uncover risk-free techniques with good returns and be able to share them with the community.”

Nexo’s diversification strategy is expanding its product offering; BlockFi continues to onboard institutions, while Ledn has expanded into Bitcoin-backed mortgages.

As at the time of publication, Cointelegraph has not received a reaction from CeFi provider Celsius. 

The “blockfi news” is a question that has been asked over and over again. The answer to the question is not yet known, but it will be soon.

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