The global economy faced strong headwinds with the onset of a pandemic in 2020. On one hand, from financial markets to supply chain all sectors were bracing for a visibly evident disruption. On the other hand, the digital assets domain was poised for a boom. At the time of writing (23 April 2021), BTC trades at USD 48,623.74.
Capitalizing on the anticipated Bitcoin boom, Berlin-based blockchain banking service provider Bitwala announced the introduction of a Bitcoin Interest Account in May 2020 — a day after the Bitcoin Halving event last year. For this service, Bitwala has partnered with the London headquartered crypto lending platform, Celsius Network.
Bitcoin Interest Account model
The Bitcoin Interest Account focuses on attracting crypto investments by offering passive income to investors. In simple terms, it is a hybrid model that combines the concept of staking with the traditional interest-bearing bank account format.
When a Bitwala user invests in the Bitcoin Interest Account, these deposits are held in custody with the intent to provide advances or lending services. In return for their investments, Bitwala users may receive a passive income of up to 4% annually in the form of weekly interest payments in BTC. At the time of writing, the interest rate on this account was 3.51% per year.
As part of the collaboration between Bitwala and Celsius, the funds from the Bitcoin Interest account will be used in Celsius Network’s asset pool. According to the Bitwala FAQ section, Celsius held investments from 40,000 users with assets under management of over USD 300 million (as of 20 April 2021).
Celsius provides advances to Institutional Borrowers by accepting deposits in the form of crypto-collaterals. These borrowers will be charged interest on borrowings by the network. A portion of these interest receipts will be shared with Bitwala’s Bitcoin Interest Account holders.
Features of Bitcoin Interest Account
BTC Interest Account Holders are entitled to weekly compounded interest payments every Monday. However, the interest percentage keeps varying depending on market demand. A higher borrowing demand for a particular token can drive up its interest rates and vice-versa. The exact quantum of the weekly interest amount is calculated dynamically on each Friday.
Since Celsius offers collateralized loans, there are no lock-in requirements for this account. Bitwala users can withdraw their cryptocurrency at any point in time. Although they won’t be penalized for their withdrawal, it will have an impact when calculating the interest amount accruals.
The minimum deposit amount is equivalent to EUR 10 in BTC. This limit is fixed to account for the network fees incurred when transferring the bitcoins to the Bitcoin Interest Account. Other than the network fees, no investment or withdrawal fees are charged.
All cryptocurrency investments with the Bitcoin Interest Account are stored in non-custodial wallets and users have access to them at all times. To ensure higher levels of security, Celsius also performs automated KYC checks before accepting these funds in their asset pool.
Please follow the following link in order to open up a Bitwala Bitcoin Interest Account.
The company was founded in October 2015 by Jörg von Minckwitz, Jan Goslicki, and Benjamin P. Jones and operates under the name of Bitwala GmbH, according to Crunchbase. To date, it has raised over EUR 33.3 million from seven funding rounds. The latest funding (Series B funding) round in November 2020, led by Global Brain Corporation and Earlybird Venture Capital, generated €15 million in proceeds.
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