BlockFi vs Celsius 💰 Is It Worth The Risk? - YouTube

Welcome back to another comparison, where I will be comparing the two most popular crypto

lending platforms Blockfi vs Celsius Network.

In this video, we will be covering the potential returns from your interest crypto account

but we will also dive deeper into the risks which you should consider when lending your

crypto to others via centralized crypto lending platforms.

By the end of this video, you will be able to evaluate for yourself which crypto lending

platform is the better fit for you.

So let’s get right to it as we have a lot to cover today.

As always, if you are new to this channel and your goal is to become a more educated

P2P investor, consider subscribing and hit the like button to see more content like this

in the future.

Both companies BlockFi and Celsius were founded in 2017.

The US-based BlockFi was co-founded by Zac Prince who has previous experience in sales

as well as in the lending business.

The UK-based Celsius platform was co-founded by Alex Mashinsky who is a serial entrepreneur.

In this comparison, we won’t be going deeper into the experience of founders.

Both CEOs give regular interviews and Alex participates in a monthly AMA session where

he answers all of the questions Celsius users might have.

If you are considering Celsius, I recommend watching all of the talks to get an idea about

how the platform works.

Both companies have raised a significant amount of money to support their growth.

When it comes to the financials, Celsius made a loss of $34 M last year.

Unfortunately, I couldn’t get my hands on the financial report from BlockFi.

Some sources claim that the company is profitable but I couldn’t verify this information myself.

Currently, both platforms manage around $10 B in assets.

Celsius claims to have 531,000 users whereas BlockFi has just about 125,000 active users.

So that’s been some basic information.

Now let’s talk a bit about the products that both crypto lending platforms offer.

BlockFi and Celsius let you earn interest on your cryptocurrencies.

You simply deposit your crypto and choose in which currency you want to earn interest.

The promised return depends on your cryptocurrency.

Some currencies offer an APY of 3% others up to 15%.

There are no minimum investment amounts so you can start investing with very little crypto

to get a feeling of how the platform works.

BlockFi offers you a desktop version as well as a mobile app, while Celsius is currently

available only as a mobile application, although they claim to work on a desktop interface

as well.

So, here are the interest rates offered by BlockFi.

As you can see the interest rate for Bitcoin depends on the number of your bitcoins.

You can earn between 3% and 6%.

For Ethereum you can expect to get 5.25% and for Litecoin 6.5% per year.

The rates on BlockFi don’t change as frequently and the interest is being repaid on monthly

basis in the cryptocurrency which you are selecting.

So for instance, if you deposit Bitcoin, you can choose to receive interest in Bitcoin,

Ethereum or Gemini USD.

That’s quite useful if you want to bring more stability and lower the “currency”

risk which is caused by the volatility in the crypto market.

Stablecoins like the Gemini USD are backed by the US dollar which is in relation to many

cryptocurrencies a stable asset.

On Celsius, you have a much broader choice of assets.

Whereas BlockFi offers you to earn interest only on 11 cryptocurrencies, Celsius offers

you up to 30 cryptocurrencies.

What’s different about Celsius is that they have their own utility token which allows

you to earn higher interest rates on your crypto.

To get your interest boost, you have to hold a certain percentage of your portfolio in

the CEL token.

In addition to that, you can also choose to earn CEL tokens as interest payments.

This could be useful, as the value of the CEL token has increased significantly over

the past few months.

You can also trade this token on the Bitfinex exchange if you want to convert it into a

different currency.

What’s worth mentioning is also that the interest on Celsius network is being repaid

on a weekly basis.

What you should know though is that Celsius changes the rates weekly depending on the

market conditions and the demand for loans.

Both platforms BlockFi and Celsius don’t charge any direct fees to deposit your crypto

on the platform, there are, however, other fees that you should be aware of.

So first, if you want to buy crypto with fiat, you have to pay the exchange fee, which is

usually charged by the exchange on which you are making the purchase.

Both platforms offer you to either deposit your crypto to your dedicated wallets or to

buy crypto directly from the platform.

BlockFi allows you to exchange USD in USD as a stablecoin through a wire transfer.

This is more suitable for US-based users as European banks typically don’t support this

transfer method.

We haven’t found any listed fee for this service.

The fees will be likely charged by your bank.

On Celsius, you can either buy crypto directly from the app with a credit card for a fee

of up to 4.1% or you can do a bank transfer with lower fees between 0.1% and 0-5%.

Buying crypto through a bank transfer can take between 3 and 5 days.

Now, if you send your crypto from exchange to Celsius you will be likely charged a withdrawal

fee, which you can find on your preferred exchange.

In addition to that, you will be paying a transaction fee.

So for instance, if you transfer Ethereum or stablecoins which run on the Ethereum network,

you will be paying a so-called “gas fee” which can be quite high when the demand for

transactions is high.

Actually, we have recently got an email from our viewer, who exchanged €1000 into USDT

for which he paid €8.43.

Then he transferred the crypto to a crypto lending site for which he paid €42.11 transaction

fee.

That’s basically €50 in fees just to deposit your crypto.

With the current market conditions, you can expect the same fee when withdrawing your

cryptos.

Now, Celsius offers an interest of 10.5% for USDT at the moment.

This means that on €950 worth of crypto, you will get €104 worth of crypto in one

year.

That would cover the deposit and withdrawal of your crypto on a crypto lending platform

in case that the value of your coin remains the same.

This is something that you should keep in mind as this isn’t obviously advertised

by the platforms themselves.

If you plan to deposit lower amounts for a shorter period of time, it doesn’t make

sense as your interest won’t even cover the fees.

Unless you expect the value of the cryptocurrency to skyrocket.

In that case, you won’t care too much about the fees.

As you know, crypto is a volatile asset and it can go really well but it can also end

up bad if the value of the crypto asset plummets.

In addition to the earlier mentioned fees, you should also look up the withdrawal fees

of the two platforms.

Blockfi offers you one free withdrawal on your crypto and stablecoin per month.

Celsius doesn’t charge any withdrawal fees.

After your free withdrawal on Blockfi, you will be charged 0.00075 BTC which equals 34€

or 40USD at the moment.

Now you should have a good idea about the returns from your deposited cryptocurrencies.

Both platforms, however, also offer you to borrow cash with low-interest rates in exchange

for your crypto as collateral.

BlockFi actually offers its loans only to US citizens and Celsius offers their loans

to everyone except borrowers from the US.

On Celsius, you can also borrow crypto, whereas on BlockFi you can only borrow USD.

The minimum loan amount on BlockFi is $5000 for a period of 12 months.

On Celsius you can borrow from $500 with a minimum loan term of 6 months.

The cost of borrowing depends on the loan to value.

You need to deposit at least twice as much value of your crypto for the amount of money

you want to borrow.

The lower the loan to value ratio the lower the interest rate.

The APR on Blockfi varies between 4.75% and 9.75% at the moment.

There is also an origination fee of 2%.

On Celsius the rates start at 0.75% APR and can go as high as 8.75% APR.

If you chose to pay back in CEL token, you will get even better rates.

In addition to that Celsius doesn’t charge any origination fee which makes the borrowing

much cheaper.

Besides lending and borrowing, BlockFi offers also a trading feature, which I wouldn’t

recommend as the spread between the actual rates is quite significant.

On Celsius you can also transfer crypto from one user to another which is a neat feature

if you want to send crypto to your friends that also use Celsius.

In terms of new products, BlockFi will be launching a bitcoin rewards credit card soon,

whereas Celsius will be introducing a self-insurance feature in the near future.

Now, you might be wondering how do BlockFi and Celsius make money?

Well, they earn money from the spread between the APR that the borrower is paying and the

interest which is being paid out to the depositors.

BlockFi makes additional revenue from withdrawal fees, origination fees, and the spread from

their trading tool.

Unfortunately, none of the crypto lending platforms are very transparent in this area.

If you try to calculate the margins yourself, you will likely conclude that it doesn’t

make that much sense.

Our guess is that platforms can only become profitable through large volumes.

Until then they will make a loss, which you can also see for yourself on the financial

reports from Celsius, which I will link for you in the description below.

Many of the investors might find this concerning.

On the other hand, both companies managed to attract venture capital investors which

decreases the likelihood of an exit scam in the future.

In addition to that, both platforms are regulated by the SEC in the US and Celsius is also aiming

to become regulated by the FCA in the UK.

Before we wrap up this comparison, we should certainly talk about the safety features that

both platforms offer.

So first of all, BlockFi uses Gemini, BitGo and Coinbase as their custodian.

Gemini offers insurance of up to 200$ million which by the way covers also their hot wallets.

Celsius uses Fireblocks and PrimeTrust which offer insurance of up to $30 million.

None of the cryptocurrency is covered by the FDIC insurance nor any other protection scheme

which is used by banks.

Any offered insurance is not of much value to you since you are lending your coins to

borrowers.

Your coins are therefore backed by the collateral which the borrower deposits.

All loans are overcollateralized and if the value of the cryptocurrency plummets, the

borrower will need to deposit more crypto otherwise the collateral will be liquidated,

and your investment repaid.

What you should be aware though is that as soon as you deposit your crypto on any of

the two crypto lending platforms the digital asset is replaced with an obligation to return

the same amount of the crypto plus any interest earned.

We call this state an IOU which stands for I owe you.

The platform basically takes your crypto and replaces it with a promise to return it.

You are no longer the owner of your crypto anymore as you don’t hold the private keys.

You might be familiar with the phrase “ not your keys, not your coin”.

You are basically trusting the crypto lending platform, or any crypto exchange for that

matter, that they won’t freeze your account or that they won’t lose your coins.

You might not care about it if your crypto is worth 1,000$ but what if the value rises

to 100,000$?

Are you still going to be comfortable with a simple promise to get your money back if

you need it for a lousy 3% to 6% interest rate per year?

That’s a question you should ask yourself before starting lending crypto to others.

Blockfi has been actually hacked in the past, and hackers were able to obtain personal information

such as email addresses, postal addresses, birthdates, and the activity history of half

of BlockFi’s users.

Luckily none of the depositors lost any funds during this attack, but this is a threat that

you should consider and some of the investors on crypto exchanges have lost funds due to

attacks on crypto platforms in the past.

While both BlockFi and Celsius offer certain security measures such as a 2-factor authentication,

biometric scans, or whitelisted wallet addresses, there is always the risk of an attack on the

platform, the counterparty risk as well as the risk that the currency in which you are

lending will lose its value.

The best way to store your crypto is to store it on your hardware wallet and own your private

keys.

The idea of crypto is to have full control over your assets and not to rely on other

organizations which give you a promise of returning your capital if needed.

If you are someone who supports this idea, you will likely not want to have your crypto

stored on any exchange or on a crypto lending platform as you aren’t technically the owner

of your coin.

From a borrower point of view, the idea of crypto-backed loans is brilliant, you don’t

need to sell your assets and pay income tax or tax from capital gains, instead, you can

use it as collateral and borrow money for attractive rates super fast without any annoying

questions and lengthy approval procedures.

On the other hand, the platform is in charge of your crypto assets and can liquidate them

when the value of your collateral drops which won’t make you happy.

From an investor’s point of view, it looks promising to earn interest on your cryptos,

especially if the loans are secured by collateral.

The biggest benefit is likely the fact that this type of investment is highly accessible.

You can literally invest from anywhere in the world.

If you do believe, however, that the value of your bitcoin is going to increase by let’s

say 100% over the next 12 months, why take the risk and lend your coins in exchange for

a promise to earn an additional 3% on it?

That’s something you should certainly consider before even thinking about lending your crypto

on BlockFi or Celsius.

Now, if you are ok with this, the choice to invest on either BlockFi or Celsius really

depends on how you are going to use the platform.

If you are from the U.S. and you want to lend crypto as well as borrow fiat, BlockFi is

going to be the clear choice for you as Celsius doesn’t allow US citizens to borrow money.

If you don’t plan to be borrowing but only depositing and hodling your crypto, Celsius

seems to be a better fit.

They offer slightly better rates, lower fees and the utility of their token offers many

additional benefits.

While I am typically not a fan of tokens where you don’t need them, Celsius did implement

them in a very clever way which is rather rare in the crypto space.

You can also benefit from the increase of the value of CEL tokens and trade the coin

on BitFinex if that’s something you wanna go for.

Alright, so that’s been our comparison between BlockFi and Celsius.

Unlike many other crypto lending platforms, I do believe that BlockFi and Celsius are

legitimate businesses.

If you decide that you want to participate in crypto lending and that the offered interest

is worth it for you, you can use our referral links in the description and get yourself

a small bonus.

You can get up to 10$ in Bitcoin on BlockFi and up to 30$ in DAI when depositing crypto

on Celsius.

If you decide that crypto lending isn’t worth it for you but you still want to support

our project, you can also invite us for a coffee and let us know what topic you want

me to cover next.

You will find all the relevant links in the description of this video.

Either way, I am quite curious to hear your opinion.

Do you believe that crypto lending pays off?

Let me know your thoughts in the comments below.

And on this note, thanks for watching and I will catch you in the next one.