Weakening institutional demand is forcing high-yield cryptocurrency interest bearing accounts to cut interest rates sharply

Mars financial news, the block reported that with the reduction of institutional lending demand, the return on cryptocurrency positions on some platforms has fallen to the lowest level in more than a year, weakening one of the most attractive selling points of the market for smaller investors. Since 2020, cryptocurrency lending platforms such as blockfi and Celsius have experienced amazing growth, attracting millions of customers by providing individual investors with yields ranging from a few percentage points to up to 17%. These platforms absorb deposits, lend them to institutional investors and return most of the proceeds to customers.

According to blockfi, through this business, its assets under management increased by 1711% in 2020 alone. Its competitors NEXO and Celsius have also experienced huge growth. Among them, Celsius has increased its assets under management by more than 1900% in less than a year. As of March 2021, blockfi held $14.7 billion in assets through its blockfi interest bearing account, while NEXO and Celsius held more than $12 billion and $20 billion in assets respectively.

Today, many of these companies are cutting returns to customers as cryptocurrency prices stagnate and institutions' borrowing needs weaken. For example, blockfi previously provided 6.25% interest to users holding more than one bitcoin. Now, it provides 1% - 3% interest for users holding 0.35 BTC and 0.1% additional interest for more amounts. Similarly, Celsius adjusted the return rate from 6.2% to 3.05%.