BlockFi Adds an Independent Pricing Partner to Guard Against Flash Crashes

CF Benchmarks will now update prices on crypto deposits at BlockFi every second, allowing the lender to hedge against sudden market moves.

AccessTimeIconAug 27, 2020 at 1:00 p.m. UTC
Updated Sep 14, 2021 at 9:48 a.m. UTC

Crypto lender BlockFi is partnering with an independent crypto pricing provider to value customer deposits and collateral.

CF Benchmarks will price customers’ assets based on data it has sourced from five crypto exchanges that have passed the criteria in its methodology for pricing crypto: Bitstamp, Coinbase, Kraken, Gemini and itBit. 

BlockFi is the first crypto lender for which CF Benchmarks is pricing assets, even though the company usually works with firms such as exchange-traded fund provider Wisdom Tree. In September of last year, CF Benchmarks was the first cryptocurrency index to be recognized as a “Benchmark Administrator” under European regulations. 

“You might see other providers in the market that operate exchanges and use the exchange for pricing but it might not be an indication of where the actual price is and where the liquidity is,” David Olsson, BlockFi’s global managing director of European and Asian markets, said in an interview.

CF Benchmarks’ indices update every second versus the five or 15 seconds at other index providers, CF Benchmarks CEO Sui Chung said. Prior to adding CF Benchmarks, BlockFi was able to capture data several times a minute, said Olsson.

“In terms of risk, let’s say with a five-second index … if you try to liquidate the loan when the market is moving very quickly, you may miss the boat and by the time you’ve managed to liquidate, you’re actually in negative equity,” Chung said. 

Because bitcoin is an asset that can move in clips of hundreds of dollars per second, capturing price data allows BlockFi to hedge against flash crashes more efficiently, Olsson added.

The partnership follows a $50 million Series C funding round BlockFi raised to increase personnel and equity capital as the company expands its global reach. 

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