BlockFi Withdrawal Fee Avoidance = Crypto Gambling Problem.

I have to talk about this, and I hope others can provide feedback on what I did. Here are the events as I recall them. I made some mistakes in losing out on yield farming, and one was trying to avoid the BlockFi withdrawal fee.

Gambling with my money trying to avoid the BlockFi Withdrawal Fee.

I don’t care how long Cryptocurrency might have been around so far, but we are still in new territory. Having assets manufactured out of ‘nothing’ with the best of them created from math problems or an algorithm can lead to problems.

People need help figuring out a digital asset’s ‘true’ value. As a result, some of us might have problems if we bet with people who don’t know what they are betting with.

Although I knew the rules and the terms of conditions and felt BlockFi set up a system in our best interests, I was gambling. I understood the risks, BlockFi defined a return for any deposited funds, and I was on my way to Yield Farming In Cryptocurrency.

BlockFi Withdrawal Fees Paralyzed Me.

No secret, I became spooked by the stories about some stable coins losing value, and it made me fear that there wasn’t a 1:1 ratio of cash(or some other tangle asset) to crypto.

So I decided to withdraw about half of my money from BlockFi.

I was second-guessing myself:

Why withdraw, and if I needed to be more concerned about withdrawing all my money from BlockFi?
If I was genuinely worried about BlockFi, why didn’t I withdraw it all?

Now the real dilemma:

If I made a mistake in pulling out almost 1/2 of my deposits in BlockFi, I would only lose 1/2 of the monthly interest I could have collected.

If I am right about my uneasy feelings about the current state of centralized cryptocurrency platforms, I could lose 1/2 of my deposit.

Why Deposit In BlockFi Anyway – Safety?

BlockFi is a well-known platform with connections to a well know Crypto Exchange: Gemini Exchange.

Also, when you deposit your money with BlockFi, I can convert the US Dollars to Gemini Dollars (GUSD), a secure crypto coin.

With details in BlockFi’s terms and conditions and self-promotion of their solvency through audits and Gemini being licensed by the state of New York, I felt safer.

Even an insurance policy was advertised in place to protect my money from hackers, again felt BlockFi was taking steps against me losing my money.

Solid terms and conditions, stablecoin options, and separate insurance coverage made me feel safe with BlockFi.

A strong reason why I was second-guessing withdrawing my money from BlockFi.

Why Deposit In BlockFi Anyway – Yield Farming?

Yes, I want to yield farm. Whether field farming with a regular bank savings account or yield farming with Cryptocurrency, the goal is to make the most money from your deposited funds.

BlockFi offered a very high yield for my deposited money.

So I was making good money for what I considered very liquid money during a time when depositing your money in banks resulted in it losing value due to inflation.

Again, A strong reason why I was second-guessing withdrawing my money from BlockFi.

Why Deposit In BlockFi Anyway – Return Options?

Now I could just have kept my money with Outlet Finance. Both kept my money reasonably liquid, and both platforms had high-yield farming returns. Both institutions seemed very reputable for holding my deposits.

What set BlockFi apart, I could turn on a setting and let any monthly interest reinvest in any coin on their platform. I tried and liked it and had interest deposited into my account in Bitcoin.

I did this only for a month or two, but it was incredible how I had ‘free’ Bitcoin using BlockFi.

I found a few other services that offered this hands-off option as they did.

Again, A strong reason why I was second-guessing withdrawing my money from BlockFi.

What Is At Stake With My BlockFi Account?

Well, let me put the math together.

So, I moved cash out of the stock market, played with options, and grew that money. With some concerns about my ability to focus on options trading, I paused and moved most of that money to BlockFi.

When I figured out my monthly expenses, I calculated a 3-6 month emergency fund, and I had a 6-month Emergency fund I saved over the years. Well, this money, too, got moved to BlockFi.

I had both my 6-month emergency fund and my option trading funds moved into BlockFi. To some options traders, six figures in cash on hand is not a lot of money, but it is to me.

It took me years to save up my emergency fund to the point I felt ‘safer’ after recent lock-downs and changes in my job expectations.

Plus, it wasn’t just my emergency fund in BlockFi; it was my options trading money that has grown significantly over the last few years.

Any loss in my money in BlockFi would be devastating.

What Happened To My Withdrawal From BlockFi?

As mentioned before, I pulled out like 1/2 of my deposited money; this was 6/14/2022, after some concerns about how stable stablecoin is with problems occurring with TerraUSD (UST).

Also, Celsius Network is freezing customer withdrawals.

I was concerned there would be spreading ripples, and GUSD was at risk too. I needed more solid on my concerns; I understood Cryptocurrency, in general, was losing market share, but BlockFi stated they forced their borrowers to over-collateralize any loans they took.

I Felt BlockFi had my back, but a gut feeling made me still withdraw money from BlockFi.

Then It Happened Further….

Two days after I pulled out half my money, it was reported Three Arrows Capital failed to meet their margin calls. My understanding BlockFi was one of Three Arrows lenders.

Was BlockFi secure? They were offered a bailout by FTX, why would I be concerned?

More importantly, rumors were spreading that the value of cryptocurrency collateral was losing so fast due to over-leveraging in general; even proactive institutions like BlockFi were being destabilized. These were rumors at the time, but my gut feeling was in overdrive.

Over 1/2 of all my cash was sitting in my BlockFi Account.

I wanted to pull out the reaming half, but here is where stupidity kicked in. I was convinced I was overreacting. Cryptocurrency is here to stay.

Also, I made one withdrawal from BlockFi for the calendar month, and if I did another, BlockFi imposed a withdrawal fee. I should have taken the time to research BlockFi’s withdrawal fees thoroughly, but I felt adamant I wasn’t going to pay any fee since that was a feature of BlockFi, with no-fee accounts.

This thinking was a gamble, a big dumb crypto gamble, based on my inability to grasp what was happening entirely. There needed to be more money to be made in Cryptocurrency for it to fail.

I Waited… For A hero. A Crypto-Hero.

That hero was Sam Bankman-Fried(SBF) through FTX offering to bail out BlockFi and another crypto platform, Voyager, with loans, reported on 6/21/2022.

Rumors of any adverse effects to BlockFi, and ultimately my deposits were squashed. There was word that BlockFi was limiting withdrawals, but for some reason, I didn’t feel it affected me.

I had no concerns about BlockFi’s withdrawal fees; I was making plans in my head to move money back into BlockFi.

Something Was Wrong…. It Came Back.

Following crypto news, there were rumors FTX was spread thin. The only reason they offered to help BlockFi, they wanted to take over BlockFi, offering pennies on the dollar immediately.

Was BlockFi Vulnerable To Take Over?

Was this a low-ball tactic for FTX to acquire another company?

Was BlockFi hurting so bad they were considering taking the offer?

Well, the rumors were pretty scary; I heard rumors that even IPO holders would have to give up their stocks for a severe discount to keep BlockFi afloat.

I was again scared and looked at BlockFi’s withdrawal fee amounts.

This newfound fear was on 6/30/2022.

I convinced myself to sleep on it and make a decision in the future as I got more information.

I Did It, I Withdrew Almost All My BlockFi Money.

I withdrew almost all my remaining money, leaving a couple of bucks in Gemini Dollars (GUSD) and all my BitCoin I collected from interest (nearly $300) in my BlockFi Account.

I withdrew $100k out of BlockFi finally. Almost 1/2 in June 2022, and the remaining 1/2 on 1st July 2022.

It’s been a few days now, and BlockFi deposited the money in my bank account after a short wait.

I figured I would sit on the money till the crypto world calmed down. Until the rumor mill calmed down, I could watch what FTX had planned for BlockFi.

Up to this point, the only thing I knew about FTX was their Superbowl commercial. Funny.

Withdrew My Money From BlockFi; What Now?

I sit and wait; what will happen with BlockFi with FTX? Is it interested in taking it over? FTX is a giant in the crypto world, and just as much as SBF has made words of being ‘generous’ with other crypto platforms, this will come at some cost of autonomy.

FTX is a larger Crypto platform, and sure they see BlockFi and Voyager’s exposure to Three Arrows Capital as a way to get other crypto platforms for a deep discount.

In the meantime, my money sits in banks and money markets. Might be looking into bonds since the emergency fund will sit around for years, I hope.

At The End Of The Day, It’s Just Numbers On A Screen, Right?

What are you doing?

Still yield farming in Cryptocurrency, or did you move money like me?

Did I make a mistake taking money out of BlockFi?

Did I make a mistake trying to avoid BlockFi withdrawal fees by waiting?

Have decades of investing and trading stocks and options, but crypto is still new. I am relying heavily upon my understanding of the market and the psychology of the average investor.

Feel free to leave a comment below.

Thank you!

Tom, Growing His Passive Income Generators.