How to Earn Interest on Bitcoin?
Earning interest on Bitcoin is far better than keeping it idle in your wallet. You can earn up to 8% interest per annum on your Bitcoin holdings, and that is far more than what traditional banks and other financial institutions pay on fiat currencies. Follow these steps to start earning interest on your Bitcoin:
- Sign up for an Interest Account
The first step for earning interest on Bitcoin is to sign up for an interest account. You will have to enter your legal name and email ID to sign up for an interest account.
- Verify Your Account
After signing up for an interest account, you will receive a verification email. Open the verification email that you received and click on the verification link to confirm your email address.
Once your email ID is verified, you will be able to log in with your credentials. Then you will have to go through a standard KYC process. Here you will have to provide your government-issued identity card and also upload a photo holding your identity card.
It is important to note that if you opt for a DeFi protocol to earn interest on cryptocurrencies, you won't have to sign up for an interest account, and neither would you have to go through a KYC process.
- Deposit Your Bitcoin
After your KYC documents are approved the next step is to deposit Bitcoin to your interest account. To deposit Bitcoin, login into your account and go to a page that shows available deposit options. You will find an option to deposit Bitcoin there, and once you click on the deposit button, you will see a unique wallet address.
Copy the wallet address and paste it to your Bitcoin wallet withdrawal page from where you want to transfer Bitcoin to your interest account wallet. Enter the amount of Bitcoin you want to transfer and click on the send button. Soon, you will receive the Bitcoin in your interest account.
- Start Earning Interest
Once you have Bitcoin in your interest account, the interest accruals will begin almost immediately. Depending on the Bitcoin interest account provider, you will earn interest up to 8% APY on your Bitcoin deposit.
Why Earn Interest on Bitcoin?
One of the best ways to multiply your Bitcoin holding at low risk is to earn interest on it. It is a far better option than only HODLing Bitcoin. Instead of just hodling, your mantra should be: Hodl and Earn Interest.
- Easy and Straightforward Process
The only thing that you need to do here is signup for an interest account, go through the standard KYC process, and transfer Bitcoin. Thereafter, your Bitcoin deposit will automatically start earning interest. You won’t have to create an account or go through a KYC process if you opt for a DeFi platform to earn interest on your crypto assets.
- Low Risk
Bitcoin interest account providers earn money by lending cryptocurrencies and fiat currency to their users. From their earnings, they pay a part of their earnings as an interest to their interest account holders. As far as the risk goes, most of the crypto lending platforms mandate over-collateralization. Hence, there is a very low risk in keeping your Bitcoin in interest accounts offered by them.
- Passive Income
With Bitcoin interest accounts, you can earn money even while sleeping. Deposit Bitcoin to your interest account and your passive income begins.
Where can I earn Interest on Bitcoin?
There are many Bitcoin interest account providers today. But the top ones are Nexo, YouHolder, and BlockFi. Each of them follows different criteria for deciding the interest that you will earn on your Bitcoin deposit.
One of the most well-known names in the crypto lending space, BlockFi offers interest up to 6% APY on Bitcoin deposits. They do not have any minimum balance requirements, and you can create an account on BlockFi for free.
The process of earning interest on your Bitcoin deposits on BlockFi is easy. Create an account on BlockFi, complete the KYC process, deposit Bitcoin to your BlockFi interest account, and start earning interest on your funds.
The interest accrual happens daily but is paid monthly. To calculate the amount that you will earn on your Bitcoin deposit within a certain period, you can use the interest calculator provided by us.
Nexo offers up to 8% APY on Bitcoin deposits, and this is one of the highest interest rates paid on Bitcoin deposits in the industry. But to earn the highest rates of interest, your portfolio must consist of 10% of NEXO tokens.
There are two types of interest accounts on Nexo, and these are the fixed & flex interest accounts. If you sign up for a fixed account, you will be able to earn the highest interest rates offered by Nexo. But you won't be able to withdraw your Bitcoins until the duration of the fixed period ends, which can either be one month or three months.
Flex interest accounts, on the other hand, offer you an option to withdraw your Bitcoins at any time you want. It also offers a daily payout, which is not available in fixed-term interest accounts.
YouHodler is another popular name in the crypto lending space. Currently, YouHodler offers 4.8% APY on Bitcoin deposits, and they check funds in user accounts multiple times a day to calculate earnings. You can also leverage the Multihodl and Turbocharge feature of YouHodler to earn even higher interest rates.
They do not charge any withdrawal charges from the interest account holders and offer round-the-clock access to their Bitcoins. But unlike its peers, YouHodler mandates a minimum deposit of 0.1 BTC to earn interest.
Is it Risky Earning Interest on Bitcoin?
Earning interest on Bitcoin is one of the lowest risk options in the crypto space to multiply your Bitcoin holdings. Yet, there is no denying there is an element of risk involved in it. Crypto lending platforms pay you interest on your Bitcoin holdings from the money that they make by lending Bitcoin and other cryptocurrencies.
Most of the crypto lending platforms require over-collateralization for receiving loans from them. But if you deposit Bitcoin with platforms that do not require over-collateralization, then there are chances that you may lose your deposit if their borrowers do not return the loan amount.
If loan default increases by a considerable margin, the platform will become bankrupt. Now, if a crypto lending platform loses liquidity in the event of bankruptcy, you may lose your deposit along with any interest income that your deposit will accrue.
When it comes to insurance covering user funds, it may not be enough to cover the entire fund value. If the deposits worth billions of dollars are lost by a crypto lending platform, insurance coverage for $100 million or so won't be able to cover the entire loss.
But if you do your research well and select from the most credible Bitcoin interest account providers, your Bitcoin deposits will remain safe and you will continue to earn high interest on your deposits. Overall, earning interest on Bitcoin is one of the least risky ways to multiply your Bitcoin holdings.
What to Look for When Choosing a Platform?
There are a few things that you must check when choosing a platform offering Bitcoin interest accounts. The foremost criteria are the interest rates offered and for how long the platform has been active in the industry.
It is not wise to always opt for the highest interest rates, as newer platforms are likely to offer the highest rate of interest. But the risk factor involved is far higher. Security is a crucial aspect that you must not neglect while choosing a platform offering Bitcoin interest accounts.
Another important criterion to check is if the platform has insured the user funds. For example, Nexo has insured its custodial assets for $375 million. Similarly, YouHodler's funds are insured for $150 million.
Many platforms also mandate that your portfolio must consist of a specific percentage of their native tokens to be eligible for the highest rate of interest. Some platforms also offer the highest rate of interest if you opt for earning interest in their native tokens. You must also factor in these conditions in your decision.
You must also check if the platform mandates any minimum duration for keeping your funds locked in with them. It is a crucial factor as you won’t be able to withdraw Bitcoin from your interest account if the platform has a mandatory lock-in period for earning interest on it.