Investing in cryptocurrencies comes with significant risk. You could lose all the money you invest. Please read our risk warning here.
How to earn interest on highly speculative and volatile assets like crypto is a hot topic. If you plan to do so, you're joining an exciting trading space.
Using crypto to earn interest provides you with a chance to make passive income. Also, you can compound your profits when the cryptocurrency markets appreciate.
This step-by-step guide gives you the advice you need to create crypto-interest accounts. This article will provide broad insight into what earning interest on crypto entails.
Let's jump in!
How to Earn Interest with Crypto in Three Steps
Step #1: Create an Account
The first step is to sign up for an interest-bearing account on a cryptocurrency platform. An example of a crypto platform that provides this service is YouHodler. Users can earn up to 10.52% APY in crypto on this platform.
Other platforms that offer similar services are Nexo and CoinLoan. It is essential to compare the offerings of different platforms to make the right choice.
Step #2: Compare the Interest Rates
Once the account is ready, compare the interest rates on offer. The interest rates on stablecoins usually differ from those on other crypto assets.
You want to remember that other platforms provide different interest rates. Also, crypto interest rates fluctuate as they depend on market conditions.
Step #3: Deposit Crypto into your Account
Deposit your asset on the platform once your account is activated. Some platforms allow users to buy crypto with debit cards or their bank. You can start earning interest as soon as your funds are in your crypto savings account.
If you follow the three steps, it's time to sit back and earn passive income. Watch your crypto holdings grow with time.
Benefits of Lending your Crypto
Understanding how crypto lending works offers lots of benefits. Some of the benefits include:
Security
Some crypto lending platforms are regulated. Mechanisms such as LTV protect the lender's assets when lent to a borrower.
Higher Interest Rates
Crypto lending platforms offer interest rates that are higher than traditional banks.
Easy Financial Freedom
Crypto lending allows people to earn money by lending their crypto assets, helping them achieve their financial goals.
Low Barrier to entry
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.
The lending process is straightforward because lending platforms manage the entire process.
Learn more
Want to learn more? Click here to learn about why crypto lending is very profitable.
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 interest rate and the value of the deposit. A lender can secure a steady passive income stream with enough assets deposited.
Interest rates are attractive because of the factors that make crypto lending so profitable. Among these factors are:
Demand and Supply
Taking out a secured loan using crypto collateral is attractive to many individuals. Borrowers secure personal loans or business financing without going through a credit check.
Interest rates are high because lending platforms need crypto assets on hand to lend.
Growth Rate
High-interest rates that are compounded attract lenders, who can drive massive growth.
Learn more
Want to learn more? Click here to learn about how much you can make with crypto lending.
How Much Can You Make with Crypto Lending →
What are the best cryptocurrencies to lend?
It is possible to earn interest on crypto using any cryptocurrency. It all depends on the platform you choose and the cryptocurrencies it supports. Many leading crypto interest accounts offer digital assets like Bitcoin, Ethereum, and Cardano.
Stablecoin lending offers yield without volatility concerns. With stablecoins, you can earn interest without worrying about price fluctuations.
Opting for other assets like Ethereum and Bitcoin has the risk of the token's value going down.
That Sounds Great, But Are There Any Risks?
Yes, there are risks. Some risks you can encounter are:
Hacks and Exploitations
Hackers attempt to infiltrate crypto platforms because they serve as a honeypot for them. Unlicensed platforms are prone to security breaches. Platforms with simple security infrastructure might also be easy to break into.
Market Risks
Your crypto savings account could be subject to enormous market swings. This is true if your deposited crypto assets aren't stable coins.
Counterparty Risks
Using your crypto deposits, crypto lending platforms offer loans to borrowers. And, as you may already know, loan arrangements come with the risk of default.
If a small number of borrowers default on their loan repayments, you wouldn't even know about it. But if there are many defaulters, this could be something to get worried about.
Platform Risks
Depositing assets into a lending platform means dealing with a centralized body. That means you trust the provider to meet all its obligations.
The platform's obligations include ensuring the safety of your crypto assets. It also means ensuring they give you your share of the interest on time and at the agreed-upon percentages.
There's no guarantee that the platform will keep the agreements you sign. Thus, you must research the respective lending platforms to register with.
Learn more
Want to learn more? Click here to learn about which platforms are safest for crypto lending.
Safest Crypto Lending Platforms to Use →
What Else Should You Know Before Choosing A Crypto Savings Platform?
If you're convinced that a crypto-interest account is for you, you want to look at the following areas:
Withdrawal Policy
Some crypto-interest account platforms have easy deposit processes but complex withdrawal processes. Make sure the platform's withdrawal policy meets your expectations.
Payout Frequency
Nothing is more aggravating than receiving a payout from a platform that does not meet your requirements. You want to ensure that the provider's payout frequency suits your individual needs.
Instant Redemption
Ask whether you are allowed to redeem your funds instantly when you wish to. Some platforms might not allow for emergency withdrawals.
Legality
In most countries, crypto lending is legal, and regulations exist to ensure protection. But it's worth checking your locality's stance to ensure you're not breaching any rules.
Is Earning Interest in Crypto for You?
Crypto interest accounts 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 don't mind holding your assets for a long time, earning interest on crypto is rewarding.
Should You Lend Your Crypto to Earn Interest?
While you should research crypto lending, you can make significant gains if you do so. The first step in lending your cryptocurrency is determining which platform you should deposit on.
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, the lender can make a report to fix them. Some centralized platforms even offer deposit insurance, making them less risky.
Decentralized lending platforms are riskier places to invest your digital assets. Smart contracts are a type of code that governs these platforms. These codes automatically determine the interest and borrowing capacity (LTV ratio).
Unfortunately, smart contracts can be faulty, leading to issues later on.
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Want to learn more? Click here to dive into whether or not you should lend crypto.
Reasons You Should Lend Your Crypto →
Conclusion
Cryptocurrency interest accounts offer investors the best of both worlds. You get regular interest on your crypto while hoping its value increases over time.
They deliver better yields when you compare them to your conventional bank account. Yet, it would be best if you always considered the risks involved and whether crypto lending is legal for you.
