Cryptocurrency investors can earn interest through cryptocurrency lending by finding a cryptocurrency exchange or DApp that offers a cryptocurrency interest account.
The cryptocurrency industry has given developers and investors the opportunity to introduce new financial tools that offer wide options for generating passive income. Holding cryptocurrencies has given impatient investors the opportunity to make a profit over the years. However, there are many other ways to increase the crypto asset stack even in a bear market.
Unlike staking, crypto savings accounts allow individual investors to pool their money by earning interest on the crypto assets they deposit on certain cryptocurrency platforms if they agree to lend their coins or tokens. Crypto interest accounts are particularly attractive because they offer much higher returns than traditional bank savings accounts, as the average interest rate charged through a crypto savings account can go up to 7.5% versus 0.06% on average for savings bank accounts.
Related: DeFi Staking: A Beginner’s Guide to Proof of Stake (PoS) for Coins
The pricing difference between traditional savings accounts and crypto accounts is substantial, but brings with it higher risks associated with the service. Here we will explore how to access crypto savings accounts, interest rates, deposit terms and the risks associated with such financial instruments.
What is a crypto savings account?
Cryptocurrency interest calculation is typically a DeFi platform service that allows you to earn interest on a digital asset you deposit and in return agree to lend. This service is similar to a bank savings account, which will lend your money to other customers or financial institutions for a specified period of time and earn you interest for that service.
By definition, blockchain technology encourages users to be independent from third parties. However, brokerage firms have become a necessary component in the industry, offering crypto savings accounts to those who want to take advantage of the technology without much effort to learn the complex and cumbersome processes.
Apart from convenience, these companies will also assume some of the associated risks and ensure that depositors are paid first in the event of adverse events such as bankruptcy. Some companies are backed by insurance and work with established custodians to protect their clients.
How does a crypto savings account work?
Once you deposit your crypto assets into a savings account, you start enjoying the benefits from day one. The most popular cryptocurrencies can be used in a crypto savings account, the most preferred are Bitcoin (BTC), Ether (ETH) and Litecoin (LTC), while many people prefer interest rates to stablecoins such as Tether (USDT), USD Coin (USDC). . ) and Pax. dollars (USDP).
By depositing your crypto assets into a savings account, you are officially giving the platform the right to use your funds for any purpose, from lending to investing or saving on your behalf. First, it will be used to lend money to earn high returns, some of which will be paid to you as regular interest payments.
Crypto savings accounts can offer you better odds if you agree to lock your crypto for a while or keep a platform-specific code. For example, Nexo is raising interest rates up to 4% for platform management token holders.
How do you invest in a cryptocurrency savings plan?
When you want to invest in a crypto savings plan, the first step is to choose the right account for you and get started:
Choose a cryptocurrency platform that you trust and offers realistic interest rates;
Transfer cryptocurrencies to this preferred platform;
Follow a few simple steps to deposit your crypto assets into a savings account. These steps are usually quite simple and you will be guided by the platform throughout the process;
Choose to deposit your assets for a limited time or set a flexible period that allows you to withdraw your crypto at any time;
Start earning interest from day one.
As mentioned, there are plenty of platforms to choose from, including well-established cryptocurrency exchanges like Coinbase, and have the following indicators for fixed savings interest rates:
Binance is another popular global crypto platform that offers interest rates on many cryptocurrencies with flexible savings and secure savings options:
An increasing number of financial services companies and cryptocurrency platforms offer such accounts. Nexo and Crypto.com are among the companies that offer higher interest rates to cryptocurrency holders who hold their assets for weeks or months. However, the downside of this type of savings account is that you cannot withdraw or sell your crypto during this time.
The interest you can earn with a crypto savings account