BlockFi confirms its valuation doubled in roughly 2 months

Crypto lender BlockFi has doubled its valuation in approximately two months, the firm's founder Zac Prince confirmed to The Block.

Amidst the roll-out of a trading platform and after the close of an $18.3 million funding round, the lender is growing 1-2% daily across its key performance indicators, including user acquisition rates and balances on the platform. 

"It will probably more than double again before this point next year. We are growing very quickly," Prince said.  

Rapid growth

Galaxy Digital's Q3 financial report shows that an investment in BlockFi was reaping significant returns. A $4.4 million investment rose to a $7.9 million fair value from about early August to the close of September, pointing to a doubling in BlockFi’s valuation. The exact value of the company is still not clear since Prince declined to disclose. The percent of shares Galaxy owns is also not precisely known.

Regardless, it’s clear BlockFi is growing fast, adding trading to its product offerings of lending, institutional services and interest accounts. 

“Already this morning quite a few trades are being placed,” said Prince.

"We think a single-digit percentage of balances on the platform will trade." 

But why? 

Prince said the interest account product is driving much of the company’s growth. According to CoinMarketCap data, BlockFi offers competitive interest rates that often trump over other lending platforms. 

“That’s the biggest driver of customer acquisition and that’s the core value prop that people are coming to us and looking to receive,” he said. "We have the best rates for every asset that we support right now." 

Coin Market Cap showed BlockFi leading the pack in bitcoin interest rates and among the top three for ethereum and Gemini Dollar at the time of publication. 

The firm is also looking to expand its business lines. The new trading feature, which BlockFi rolled out on Thursday, allows existing users to buy bitcoin, ethereum, and GUSD with their deposits on the lending platform. 

The addition of trading adds BlockFi to the list of service providers becoming conglomerates, all offering a variety of services departing from their original mission. Token sale platform CoinList recently announced plans to launch its own exchange. Blockchain.com built out a multi-million dollar lending business in the past few months. But Prince said this is to be expected – in the financial world, business models converge. 

“That’s kind of the tried and true strategy of building a defensible business in financial services, whether it’s banking or brokerage or a crypto exchange,” he said.

There's still a borrowing problem

The addition of trading, however, won't do much to mitigate the shortage of borrowers in the crypto industry, according to Prince. Despite the rapid growth of capital markets in crypto, Prince said they’re still younger and smaller in size compared to what one would expect with crypto’s market cap. 

“I think there’s still a lot of growth there,” he said. “I see that there’s still a lot of maturation that needs to happen in terms of finding a supply and demand balance for both lending and borrowing dollars and lending and borrowing crypto.” 

The value that trading does bring to BlockFi, according to Prince, is "sticky relationships" with clients. For retail users, they can now lend, borrow and trade in the same place, reducing the need to leave the BlockFi platform and trade elsewhere. For institutional borrowers, who are sometimes market makers, BlockFi Trading also brings in some additional business for them. 

"We think that that kind of stickiness factor like being able to do things on our platform that you want to do on other platforms is the most important, and we are happy to not make money on any one single product or anyone single clients because we get multiple products and we want people to use as many as possible," said Prince.