What is the incentive to reduce interest for amounts >20btc? Do more, smaller deposits distribute risk, or give blockFI an additional advantage somehow?
No, its more likely simply due to the fact that they dont have enough loans to cover the interests on if lets say someone deposits 500
BTC. They keep the interest high on smaller amounts probably to increase the awareness, and because they can actually generate the amount of interest on these smaller amounts with their outstanding loans.
But its just stupid because id simply let a relative/lawyer open another account if i want to go over the 20
BTC mark, right?
These lending services are just weird to me.
Well these companies are taking your money and 'selling' it to people who use bitcoin on margin. That's where their money is to be made here. Typically it is going to be people who are shorting bitcoin are going to use their funds.
But yes, they may not have the demand from institutional investors (and others) who are shorting bitcoin to want more then 20 per account. And yes, you could have family members open everything up to go past it but you'd have to have them KYC all their information as well.
It's stupid if you think that the company is going to go under at some point, and that you'd be losing your funds. Which honestly, could happen to a crypto company at any point because there is a risk of hacking and stealing the funds (which isn't something that is present in traditional asset groups)
Is it within your personal risk tolerance to put all your funds at risk for 4-6 percent (as it does change with market movements)? You decide.