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The Bitcoin Lending Landscape is Changing

By johnwege | johnwege | 7 Jul 2021

Up until recently; the bitcoin lending landscape was an amazing place to be.  They were the golden days.  Nearly all of the services were offering at least a 6% APY rate for you to lend your bitcoin with them.  No matter which service you chose to use, you couldn't go wrong.  Money was there to be made.  It was more a decision of which service you preferred and which one's you trusted the most.  But those golden days are quickly coming to an end.  Rates have been lowered significantly at most of these services, if not in price but also in the limit for how much BTC you can lend to qualify for those rates.  If you are wanting to be successful in this landscape, it is requiring a lot more effort, attention, strategy and isn't as passive as it used to be. But with that said, it is still very worth your time.  After all, the name of this game is to accumulate as much bitcoin as humanly possible.  And if you are able to squeak out even just a little more BTC from these services today, it can truly become life changing years down the line.

So here is my approach for how I have been navigating these volatile days of lending bitcoin recently.

The first thing you need to decide is what is the most important thing to you.

Perhaps earning the highest yield possible is the thing that matters the most to you.  Or maybe you don't mind receiving a little less of a yield if you are able to use the service that you enjoy the most, or you feel is the safest or most secure place to custody your bitcoin.  Then there are other factors that you might want to take into account, such as each services' withdrawal process, fees, and how often they pay out their interest.  These are all factors that you need to decide what the most important is for you.

As for me, I am currently trying to maximize my bitcoin yield by earning as much interest as possible.  But this is where things can become quite tricky.  It has made this passive income activity not so passive anymore.  

In order to maximize my bitcoin earnings I have needed to stay quite alert of the recent news from these services.  Posting information about lowering their rates is something that none of these services are looking forward to doing, and therefore they will try to do so very quietly to attempt to make the pushback as little as possible.  Staying alert, means checking the services and your accounts very often.  By staying alert; just this week it saved me from losing out on my bitcoin interest.  Recently I have been lending out 1.99 bitcoin on Celsius to receive an awesome interest rate of 6.20 on up to 2 bitcoin; which is why I kept it at 1.99.  I have been enjoying the weekly interest payments very much and I just happened to check my BTC wallet on Celsius two days ago.  I was surprised to see that my current rate had dropped down to 3.51%.  Needless to say, I was surprised and immediately dug in and did some research.  I was able to see that while Celsius did keep their bitcoin rate of 6.2% for USA users, but they put a stricter limit on it.  Now it was for only up to 1 BTC.  If you were lending out more than 1 Bitcoin this means you would receive the 3.51% rate.  Naturally I quickly withdrew 1 bitcoin to a different service so that I would be able to receive the higher rate again on Celsius.

But this has been happening on almost all of these services recently.  The most notable of them being BlockFi.


It was only a few months ago that BlockFi was offering a 6% yield on up to 2 bitcoin.  But the last 3 months have seen monthly rate drops, and limits for how much BTC you can lend to receive those rates.  They initially dropped the rate from 6% to 5%, and then they put a limit that it was only up to 0.5 BTC.  But they have again lowered the rates to 4%, and for only up to 0.25 BTC.  Not only that, but if you lend out any more bitcoin then the first tier it has become not worth the risk in my opinion.

And this is where the effort comes in to play.

While a lot of the services have lowered their rates, it is still possible to receive high returns.  But now you have to perform some maneuvering and move your coins around on a month by month basis.  Especially if you are lending out quite a significant amount of BTC like I am.

This is what I am doing.

Celsius offers a rate of 6.2% for up to 1 bitcoin.  Ledn offers a rate of 6.10% for up to 2 bitcoin.  Nexo offers a rate of 4% for an unlimited amount of BTC and 5% if you lock it up for a month. (and even more if you have Nexo coins on the platform). Finally BlockFi offers a rate of 4% on up to 0.25%.

I am currently nearly maxing out the bitcoin limits on both Celsius and Ledn to achieve those high rates that are being offered.  While the total rewards may feel smaller than when I was using only one service back in the day, due to the rewards being split.  They are in fact the same, if not larger.  But, after using those services there is still bitcoin I have that I want to lend out for a yield.  That now has me debating between using Nexo or using BlockFi.  I decided to use Nexo and there are several reasons for that.  By keeping my funds at Nexo, they are much more liquid and can easily be accessed or withdrawn.  In fact, you can withdraw them at anytime.  You are given one free withdrawal per month, but outside of that there will be fees.  Next, if you lock up your funds for a month, you are able to increase your interest rate to 5%.  Which is essentially the same period that you would keep your funds on BlockFi.  Therefore you will earn a higher rate.  And finally I like the fact that Nexo pays out on a daily basis, rather than BlockFi's monthly payment.  It does feel good to wake up every morning to a small payment of SATS.  This is how I've been able to continue to maximize my bitcoin lending profits.

You need to check your lending service at the very minimum of one per week.  But I'm a little OCD and therefore I check on a daily basis.  Don't only check the services that you are using, but also keep notice of what the other services are doing as well.

As for why the price is dropping.  There could be many factors for this.  It could be due to the Grayscale premium going negative causing the arbritage game to come to an end.  It also could be due to the recent market price dumps. This might have people less excited to use their BTC and collateral and take out loans.  There could be a variety of factors.  However, I am very confident that the lending market will recover sometime in the future, especially when the cryptocurrency markets continue to become even more mainstream.  

Until that day however, we must be vigilant to maximize our bitcoin earnings.

How about you?  Have you been moving your bitcoin around to different services to maximize your earnings? Which lending service do you like the most?


As always, thank you for reading!

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