Lava’s Savings Claim Faces Scrutiny Over Interest Rates

Bitcoin-backed lending company Lava recently asserted it saved users “millions in interest costs” by refinancing loans to as low as “7% all-in” for a year. This claim has drawn criticism from competitors and raised questions about the accuracy of Lava’s figures.

Jack Mallers, CEO of Strike, a competing BTC-backed lender, published a spreadsheet analyzing Lava’s rates. Mallers highlighted that Strike operates with money transmitter licenses (MTLs) across most US states, unlike Lava, which has no MTLs.

Mallers questioned Lava founder Shehzan Maredia’s stated aim for 7% all-in interest rates, directly asking for clarification on Lava’s actual pricing.

An analysis of Strike’s and Lava’s interest rates reveals a significant disparity. After the first month, Strike maintains a 10% effective APR, while Lava’s APR reaches 35.2%. Lava’s offering includes a 5% promotional rate, a 7% post-promotional rate, plus a 2% capital charge, resulting in the higher annualized rate.

Mallers’ calculations show that a $750,000 BTC-backed Lava loan wouldn’t reach Strike’s 10% rate until a user holds the loan for over nine months.

Maredia’s claim of saving users “millions” in interest costs despite a recent product launch is now under scrutiny, given the significantly higher effective APR observed after just one month.

Critics are pressing Maredia to reconcile his stated 7% aim with the actual rates users are experiencing. Maredia has not yet responded to these inquiries.

Protos has contacted Lava for comment and will update this report as necessary.

Source: protos.com

Disclaimer: What is written here is not investment advice. Cryptocurrency investments are high-risk investments. Every investment decision is under the individual’s own responsibility.