Bitcoin’s wealthy holders turning to loans and yield as investment habits mature: Xapo CEO

Wealthy bitcoin BTC$84,459.46 holders are increasingly treating their cryptocurrency as an asset to borrow against and generate income from, marking a shift from speculation toward private banking, according to Xapo Bank CEO Seamus Rocca.

At the Gibraltar-based bank, customers are seeking cash without selling their bitcoin, putting some of their holdings into income-generating investments, or accumulating more BTC through interest paid on dollar savings, he said.

“Customers are looking for yield and alpha,” Rocca told CoinDesk in an interview, pointing to demand from funds and family offices for accumulation and income products.

The behavior reflects bitcoin’s growing maturity, he said. Five or six years ago, the cryptocurrency was primarily viewed as a trading and speculative asset. Today, more holders want financial services built around their existing wealth.

Xapo grew out of a bitcoin custody business known for its Swiss bunker storage. Its customers include early adopters who have experienced several halvings (the periodic reductions in new bitcoin issuance), and the rallies and downturns surrounding them.

The bank charges an annual membership fee of $1,000, combining dollar banking with access to bitcoin custody, investments and borrowing.

Two camps of bitcoin wealth

Experience has pushed those customers in different directions.

Some of the earliest adopters became more willing to take profits as bitcoin reached record prices, having watched gains disappear in previous downturns, Rocca said. Others, including investors who entered around 2018 and 2019, remain determined to hold and prefer borrowing against their coins when they need liquidity.

For the profit-takers, selling does not necessarily mean abandoning bitcoin. Some keep the proceeds in dollar savings accounts and receive interest in BTC, gradually rebuilding their cryptocurrency holdings while retaining cash.

Rocca said about 45% of Xapo customers use that feature.

Xapo currently advertises a variable base rate of 4.1% on dollar savings, paid in bitcoin, alongside a temporary 4.6% introductory rate for eligible new members. It’s a separate bitcoin credit fund that targets annual returns of up to 4% through lending, exposing investors to credit and counterparty risk.

The common thread is the demand to make existing wealth productive.

“The theme of this cycle is yield, accumulation, income generation,” Rocca said.

Borrowing allows customers to retain exposure to future bitcoin gains, although they also remain exposed to price declines while taking on debt.

Banks see demand, but move slowly

Traditional banks increasingly acknowledge that clients want bitcoin exposure, Rocca said. Their interest in custody and investment products represents a substantial change from the skepticism he encountered when he began working in crypto in 2016.

But building a broader offering takes time.

“Big banks are slow,” he said, describing institutions where new products require committee approvals and employees are reluctant to champion activities perceived as risky.

Political and regulatory uncertainty adds to that caution. Banks that previously feared repercussions from serving crypto businesses need confidence that a more accommodating environment will endure before committing resources, he said.

For now, some institutions are doing enough to meet customer demand through investment products, while stopping short of services that let clients borrow against or directly manage bitcoin wealth.

“Them being slow is a good opportunity for firms like Xapo Bank,” Rocca said.

He also sees benefits in a measured approach, arguing that another failure involving poorly managed crypto businesses could damage confidence in bitcoin itself.

The next wave of institutional buying

Rocca expects bitcoin’s next phase of growth to depend on more institutions making long-term allocations.

He argues that some participation through exchange-traded funds (ETFs) has involved arbitrage strategies, which differ from a corporate treasurer deciding to allocate a portion of the company’s assets to bitcoin.

“People called the institutional cycle too early,” he said.

Reduced geopolitical and regulatory uncertainty could help unlock those allocations, potentially pushing bitcoin to $250,000 over the next two to three years, in his view.

Xapo’s customers are less united about the immediate outlook. Some are buying because they believe the market has bottomed out; others are keeping their savings in dollars because they expect further declines, while earning interest in bitcoin.

For Rocca, that mix still points toward accumulation and demand for banking services that help holders build their positions over several years.