How to Lend Crypto and Earn Interest
Despite being held back by a highly speculative and volatile market, looking to earn interest on crypto is a hot topic. While a few billionaire tycoons like Warren Buffet and Ken Griffin are still skeptical about their success, digital coins are getting more popular than before, with billionaires like Jack Dorsey, Elon Musk, and Michael Novogratz supporting them.
If you’re planning to invest in and earn interest on your crypto holdings, you’re joining a new and exciting trading space. Using crypto to earn interest provides you with a chance to make passive income, which can compound your profits when the cryptocurrency markets appreciate.
This step-by-step guide will give you the investment advice you need about creating crypto interest accounts. Key topics will include how earning interest on crypto holdings works, how much interest you can earn from crypto savings accounts, how to choose the best crypto interest accounts, and selecting top crypto interest platforms to earn interest for your portfolio, all in less than five minutes.
Let’s jump in!
How to Earn Interest on Crypto
Having learned the ropes, you can start making a passive income via crypto savings accounts and earn compound yields... The following is a four-step guide on starting earning interest from your digital assets.
Step #1: Create an Account
The first step in earning interest on your digital assets is creating your account on one of the top crypto interest platforms like CoinLoan. Once your account is up, link it with your bank account so you can use cash to purchase crypto.
CoinLoan currently offers an annual interest of up to 12.3% APY in crypto, but this may depend on the particular cryptocurrency you’ve deposited. You could also try other platforms like Nexo and Celsius.
Step #2: Compare the Interest Rates.
Once your savings account is ready, take the time to make comparisons to get an idea of the crypto interest rates that different crypto holdings offer. You want to remember that other platforms provide different interest rates.
Also, crypto interest rates fluctuate depending on the prevailing market situation. Some borrowers are traders involved in leverage trading, and they can create a huge supply and demand situation.
Step #3: Purchase Crypto and Add to Your Account
Top crypto interest platforms like Nexo, CoinLoan, YouHodler, and others have made it easy to connect your bank account to your crypto savings account and purchase crypto with ease.
As soon as you buy crypto using any trusted exchange platforms like Nexo, CoinLoan and YouHodler, send your funds directly to your online crypto savings account and start earning interest.
Step #4: Start Earning Interest!
If you carefully followed the three steps on opening crypto interest accounts, it’s time to sit back and watch your crypto savings account deliver passive income and let your crypto holdings grow bit by bit.
Benefits of Lending Your Crypto
Most crypto holders don't like to lose access to their funds. However, sitting and holding onto crypto hoping that the value will appreciate is no longer the way to earn passive income from your crypto holdings. If you understand how crypto lending works, you stand to gain quite a lot by taking advantage of these lending platforms. Among the benefits that crypto lending offers to a lender include:
- Security: While crypto lending platforms aren't regulated, the LTV ratio ensures that loans can be paid back even if the staked asset value drops because of market fluctuations.
- Higher Interest Rates: Crypto lending platforms offer lenders some of the most competitive interest rates, much higher than a savings account offers to depositors in a typical bank.
- Low Entry Bar: Anyone with digital currency can potentially earn interest from lending crypto. There isn't any need for a credit check to fund crypto-backed loans.
- Easy Financial Freedom: Individuals conscious of their personal finance needs can set up accounts on crypto lending platforms to offer them great returns on their crypto assets.
Crypto lending offers many people the chance to earn money on their crypto assets by lending them to others that need those assets. The crypto lending process is straightforward, and because smart contracts manage the entire thing, the lender requires very little input from their end.
Want to learn more? Click here to learn about why crypto lending is very profitable.
How Much Can You Make Through Crypto Lending?
The amount you can make through crypto lending depends on the platform. These platforms determine rates of interest for deposits and how often the depositors receive interest. With enough digital currency deposited in the lending platform, a depositor can potentially secure steady passive income. Crypto lending rates at this point are attractive because of all the factors that make crypto lending so profitable. Among these factors are:
- Supply and Demand: Taking out a secured loan using crypto collateral is attractive to many individuals. Borrowers can secure personal loans or business financing without going through a credit check.
- Early Adoption: Interest rates are high in these lending platforms because they need the digital assets on hand to lend. Getting on board before the space gets inundated ensures that lenders can maximize their earnings.
- Growth Rate: Because of the rate of interest on these loans and the fact that a lending platform may compound that interest weekly or monthly, there's a real opportunity for massive growth.
Want to learn more? Click here to learn about how much you can make with crypto lending.
What are the best cryptocurrencies to lend?
It’s possible to earn interest on crypto using just about any cryptocurrency. It all depends on the platform you choose and the cryptocurrencies they support. Many leading crypto interest accounts focus on large-cap digital assets like Bitcoin, Ethereum, and Cardano.
If you’re interested in getting high yields without worrying about volatility, you may want to try stablecoins such as USDC or USDT, both of which are pegged to the U.S. dollar. With stablecoins, you can earn interest on crypto without getting bothered about the ever-fluctuating token prices.
On the other hand, when you opt for the traditional cryptocurrencies like Ethereum and Bitcoin, there is always the risk of the token’s value going down. Should this ever happen, you can expect that loss you incur to exceed the interest that your preferred crypto interest account platform is offering.
That Sounds Great, But Are There Any Risks?
Well, yes and no!
Yes, because high risks almost always accompany any high reward, and no, because the risk level will be directly proportionate to the crypto platform you’ll choose.
Let me explain.
The only two risks you could ever encounter are hacks and defaults.
Hackers only infiltrate platforms that do store users’ digital assets in hot wallets or those that fail to invest in security infrastructure or high-level encryption. Also, beware of unlicensed platforms that are prone to security breaches.
Crypto itself might be inherently risky, but your crypto savings account could be subject to enormous market swings depending on the platform and coins that you choose. Even though price fluctuations are part of the deal for crypto, seek investment advice on avoiding higher-risk crypto options.
We have already explained how crypto interest account providers can offer you interest for your crypto deposits – they use them to fund loans. And, as you may already know, with all loan arrangements, the risk of some default is always alive.
If, on the one hand, only a small number of borrowers default on their loan repayments, you wouldn’t even get to know about it. However, if there are many defaulters, this could potentially be something to get worried about.
With that said, most of the leading crypto interest account providers have a safeguard in place in the name of collateral. It means that every borrower is obliged to put down a sufficient security deposit in the form of crypto before they can borrow funds from a platform. The result is that even if the borrower defaults on the loan agreement, the platform will sell the collateral so that investors get their dues.
Whenever you deposit your assets into a crypto interest account, you’re dealing with a centralized provider. That means you trust the provider to meet all its obligations.
The platform’s obligations include ensuring that the crypto you’ve invested is kept safe and off the hands of cybercriminals or hackers. It also means ensuring that they give you your share of the interest on time and at the agreed percentages.
Since there’s no guarantee that the platform will keep the agreements you signed, you must do your research on respective service providers before you open a crypto interest account.
Want to learn more? Click here to learn about which platforms are safest for crypto lending
What Else Should You Know Before Choosing A Crypto Savings Platform?
If you’re convinced that a crypto earning account is for you, you want to look at the following areas:
Some crypto interest account platforms have easy deposit processes, but their withdrawal processes can be headaches. Check whether you can withdraw your funds for free or you must pay for withdrawals and if so, how much? Make sure that you understand the platform’s withdrawal policy and that it meets your expectations.
The minimum deposit amounts and periods that some providers have set could easily affect the liquidity of your digital assets. Please read the fine print since some platforms offer lower crypto interest rates than they advertise due to tiered rates based on your deposit.
Nothing can be more frustrating than expecting a weekly payout from your crypto interest account and discovering later the platform only practices a monthly payout. You want to ensure that the provider’s payout frequency suits your individual needs.
Ask whether you are allowed to redeem your funds instantly. That’s because some platforms can prove inconvenient if you require withdrawing a large amount of money urgently, maybe for a surgery or any other emergency or when you decide it’s time for you to move your funds somewhere else.
Is Earning Interest on Crypto for You?
Although crypto interest accounts enable investors to diversify their portfolios, they may not work for people who want to make quick money in the short term. You can only see its true potential if you become a long-term investor.
If you’re a crypto owner who doesn’t mind holding your digital assets over the long term, crypto interest account offerings will pay you dearly for your patience.
Should You Lend Your Crypto to Earn Interest?
While you should do your own research on whether you should lend your crypto, you can make significant gains if you do so. Deciding to lend your crypto means figuring out which platform you should deposit into. Crypto lending platforms come in two varieties: centralized and decentralized platforms. Centralized platforms have a central authority responsible for all the platform's actions. If things go wrong or there's some discrepancy, the lender can make a report to the centralized administration and have it fixed. Some centralized platforms even offer deposit insurance, making them less risky than other crypto lending platforms.
Decentralized lending platforms are a bit riskier to put your digital assets into. These platforms are governed by smart contracts, which automatically determine the interest and borrowing capacity (LTV ratio). Unfortunately, since smart contracts are not infallible, any problem in their coding can lead to issues later on. Decentralized finance is a lot riskier than depositing in a centralized platform.
Want to learn more? Click here to dive into whether or not you should lend crypto.
The conclusion of the matter is that crypto interest accounts offer investors the better of two worlds. Apart from being able to invest in your favorite cryptocurrency as you wait and hope that its value will increase over time, you can also earn a regular interest in your holdings while at it.
And, what’s more, when you compare them to your conventional bank account, a crypto interest account delivers more attractive yields, which in most cases, will go beyond 10% APY. However, it would be best if you always considered the risks involved.