It’s worse than that. BlockFi is selling or rehypothecating your Bitcoin. Gemini doesn’t need to be hacked for you to lose everything. Only “reserves” are stored with Gemini. Who the hell knows where your Bitcoin actually end up.
From their Terms of Service
10. Consent to Rehypothecate
In consideration for the interest earned on your account, you grant BlockFi the right, subject to applicable law, without further notice to you, to hold the cryptocurrency held in your account in BlockFi’s name or in another name, and to pledge, repledge, hypothecate, rehypothecate, sell, lend, or otherwise transfer or use any amount of such cryptocurrency, separately or together with other property, with all attendant rights of ownership, and for any period of time and without retaining in BlockFi’s possession and/or control a like amount of cryptocurrency, and to use or invest such cryptocurrency at its own risk. You acknowledge that, with respect to assets used by BlockFi pursuant to this paragraph, (i) you may not be able to exercise certain rights of ownership and (ii) BlockFi may receive compensation in connection with lending or otherwise using cryptocurrency in its business to which you will have no entitlement.
From their FAQ
What does BlockFi do with account assets?
BlockFi generates interest on assets held in Interest Accounts by lending them to trusted institutional and corporate borrowers. To ensure loan performance, BlockFi lends crypto on overcollateralized terms (similar to the structure of our crypto-backed loans). Furthermore, BlockFi’s automated risk management system monitors positions 24/7, providing the same trusted risk management system used with BlockFi’s crypto-backed loans. BlockFi has the ability to terminate a borrow in a timely fashion and also manages reserve balances to facilitate customer withdrawals from Interest Accounts. Reserves are stored securely with Gemini, a New York trust company regulated by NYDFS.
(Maybe not straight from there, but some 
