Why Did Most Crypto Interest Accounts Fail in 2022?

The simple business model of making money on the spread between lending and interest paid to users seems sound, especially if the loans are over-collateralized and issued to trustworthy parties. The practice of lending can be traced back over 5,000 years to 3000 BC in ancient Mesopotamia; cryptocurrency lending is just an evolution.

So, how did things go so wrong? We’ll get into that below, but let’s consider how and why so many crypto interest account customers were blindsided.

The typical markers potential users consider before signing up were proven worthless:

Many intelligent people invested in it! (In 2021, BlockFi raised a $350 million Series D at a $3 billion valuation, counting investors like the Peter Thiel-associated Valar Ventures, Bain Capital, and more.)

Lots of other people used it! (BlockFi had over 650,000 users, Celsius about 500,000, and Voyager claimed over 3,500,000.)

Its leadership team is reputable and has won awards! (BlockFi Founders made the Forbes 30Under30, as did FTX Founder Sam Bankman Fried and Luna’s Do Kwon. Alex Mashinsky was on Business Insider’s “The Silicon Alley 100: New York’s Coolest Tech People” in 2010.)

Its founders weren’t anonymous! (It’s painful to write that this is actually a big deal in the cryptocurrency industry.)

It was part of a publicly traded company! (Voyager was listed on the Toronto Stock Exchange TSX: VOYG)

The rates aren’t too obscene! (“4% on Ethereum? That’s not too crazy– things like OlympusDAO were advertising 267% APY.”)

The following article explores the causes and series of events that caused the crypto interest account dominos to fall in 2022.